Brookings Company Evaluates Its Managers on the Basis of Return

question 136

Multiple Choice

Brookings Company evaluates its managers on the basis of return on investment.Division Three has a return on investment (ROI) of 15%,while the company as a whole has an ROI of only 10%.Which of the following performance measures will motivate the manager of Division Three to accept a project earning a 12% return?

• A) ROI.
• B) Residual income.
• C) Both ROI and residual income will motivate the manager to accept the project.
• D) Neither ROI nor residual income will motivate the manager to accept the project.

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Definitions:

External Cost

Costs of a transaction that affect people other than the buyer or seller, typically not reflected in the market price.

Air Pollution

The presence of harmful substances in the air, often resulting from human activities, leading to environmental and health issues.

Tennessee

A U.S. state located in the southeastern region, known for its music heritage, particularly in cities like Memphis and Nashville.

Government Intervention

The actions taken by a government to influence or regulate various activities within its economy.