Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 38

Criticisms of ROI
Consider the information in Brief Exercise 25.5. Assume that the manager of Division 1 has the opportunity to purchase a new piece of equipment for $1,250,000 that would increase earnings by $30,000 per year. Show the impact of this purchase on Division 1's ROI. Would the manager of Division 1 be motivated to undertake the investment? Why or why not?
Brief Exercise 25.5
Computations for the DuPont Model
Saxwell Corporation has many divisions and evaluates them using ROI. The corporation's expected ROI for each division is 10 percent or above.

Compute the ROI for Divisions 1 and 2. Are the divisions meeting the expected ROI? What other information would you want to know about the investment base before comparing Division 1 and 2 performance?