Residual Income (RI) May Be a Better Measure for Performance

Residual income (RI) may be a better measure for performance evaluation of an investment center manager than return on investment (ROI) because:

A) Problems associated with measuring the asset base are eliminated.
B) Desirable investment decisions will not likely be neglected by high-return divisions of the company.
C) Only the gross book value (GBV) of assets needs to be calculated.
D) Returns do not increase as assets are depreciated.
E) Arguments over the implicit cost of capital are eliminated.