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Stenback Ceramics, a division of Fielding Corporation, has an operating income of $85,000 and total assets of $425,000. The required rate of retum for the company is 12%. The company is evaluating whether it should use return on investment (ROI) or residual income (RI) as a measurement of perfomance for its division managers. The manager of Stenback Ceramics has the opportunity to undertake a new project that will require an investment of $175,000. This investment would earn $24,500 for the company. Read the requirements Requirement 1. What is the original return on investment (ROI) for Stenback Ceramics (before making any additional investment)? First determine the formula to calculate the ROI Operating income + Total assets ROI (Enter the percentage to two decimal places.) The original retum on Investment (ROI) for Stenback Ceramics is 20 % Requirement 2. What would the ROI be for Stenback Ceramics if this investment opportunity were undertaken? Would the manager of the Stenback Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? (Enter the percentage to two decimal places.) If this investment opportunity were undertaken, the ROI would be Enter any number in the edit fields and then click Check Answer. ? parts remaining Clear All Check Answer X Requirements 1. What is the original return on investment (ROI) for Stenback Ceramics (before making any additional investment)? 2. What would the ROI be for Stenback Ceramics if this investment opportunity were undertaken? Would the manager of the Stenback Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Fielding Corporation? Why or why not? 4. What would the residual income (RI) be for Stenback Ceramics if this investment opportunity were to be undertaken? Would the manager of the Stenback Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Fielding Corporation? Why or why not? 6. Which performance measurement method, ROI or RI, promotes goal congruence? Why? Print Done

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