Comparing return on investment with residual income The Wade Division of Geisler Corporation has a current ROI of 20 percent. The company target ROI is 15 percent. The Wade Division has an opportunity to invest $5,000,000 at 18 per cent but is reluctant to do so because its ROI will fall to 19.2 percent. The present investment base for the division is $7,500,000.
Required
Demonstrate how Geisler can motivate the Wade Division to make the investment by using the residual income method.