- September 1, 2022 at 9:20 am #664812fizaaliMember
- Topics: 50
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Please say it is TRUE:
1. To see whether the decision is goal congruent we compare ROI of the company with the ROI of the manager?
2. To see whether the decision is goal congruent we compare RI of the company with the RI of the manager?
3. In chap 17 (example 1) on residual income lecture you calculated residual income of $7000 but you said that company wants to accept but you did not show anything to compare it so how can we compare it to see whether the decision is goal congruent or not?
4) Just like we compare ROI of the company with the manager. Do we follow sameway for RI?
5) Is it true that company calculate the new investment based on ROI of new investment only. The company does not measure the return on new investment on residual income. While the performance of the manager can be measured on either ROI or RI?September 1, 2022 at 3:53 pm #664851John MoffatKeymaster
- Topics: 56
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1 & 2. You calculate whatever the question requires. If asked you can then comment on whether or not the managers will be making the decision that the company wishes to be made.
3 & 4. Part (a) determines whether to not the investment is attractive to the company. Part (b) calculates whether or not the manager will accept the investment.
It is not a question of comparing anything. If the manager will make the same decision as what the company wants then things are goal congruent, if the manager will not make the same decision then it is not goal congruent.
5. This is likely to be true, but there is no rule. It is whatever the company decides to do which is what the question will be asking you to do.
You should have plenty of past question on this in your Revision Kit for you to get used to the way it is asked.
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