Comparing return on investment with residual income The Milwee Division of Sanford Corporation has a current ROI of 20 percent. The company target ROI is 15 percent. The Milwee Division has an opportunity to invest $4,000,000 at 18 percent but is reluctant to do so because its ROI will fall to 19.2 percent. The present investment base for the division is $6,000,000.

Required Demonstrate how Sanford can motivate the Milwee Division to make the investment by using the residual income method.