Residual income PROBLEM 12-4 Comparing Performance Using ROI LO2- CC4, 6] Guenther Corporation uses the return on investment (ROI) measure to evaluate its managers. A summary of the performance of two divisions is given below: CHECK FIGURE (1) Division A ROI 20%; Division B ROI 18% Division A $240,000 48,000 Division B $400,000 72,000 verage operating assets Net income The minimum required return on operating assets for Guenther Corporation is 14% Required According to Guenther's senior management, which division is the better performer? Why? measure affect management's evaluation of the two divisions? assets by $100,000 and increase profit by $15,000 1. 2. Can Guenther's management use a different measure to evaluate performance? How wll using a different 3. Suppose the manager of Division A were offered a one-year project that would increase his average operating a. Would the manager accept the project under the current method of performance evaluation? Why, or why b. Using your alternative measure of performance evaluation (as in part (2) above), do you think the 4. Comment on the value of using only financial metrics to evaluate performance. Is there any other performance not manager should accept the project? Why, or why not? measurement model available that provides a more holistic view of an organization's performance? Explain this performance measurement model in detail e celPROBLEM 12-5 Computing ROl and RI [LO2- CC4, 6