Provide the missing items in the worksheet below!

2.		Division A	Division B	Division C
	Average operating assets...........	$1,500,000	$5,000,000	$2,000,000
	Required rate of return...........	15%	18%	12%
	Minimum required return...........	________	________	________
	Actual net operating income.........	________	_________	________
	Minimum required return (above)
	Residual income	$ 75,000	$ 0	$ (60,000)

Part three below builds on parts 1 & 2. It is asking you what the managers of the divisions will do

3.	If judged by ROI	Division A	Division B	Division C
	(ROI) from above	20%	18%	9%
	Therefore, if the division is presented with an investment opportunity yielding 17%, it probably would...	____	______	______
	Judged by Residual income if Minimum required return for computing residual income...	15%	18%	12%
	Therefore, if the division is presented with an investment opportunity yielding 17%, it probably would...

Write your answer to the questions:

Please provide explanation of the managers behavior.

What are the potential problems of only using performance measures that are based on accounting such as ROI & Residual Income?