Contrasting return on investment with residual income The St. Louis Division of Missouri Garage Doors, Inc., is currently achieving a 16 percent ROI. The company’s target ROI is 10 percent. The division has an opportunity to invest in operating assets an additional $600,000 at 13 percent but is reluctant to do so because its ROI will fall to 15.5 percent. The division’s present investment in operating assets is $3,000,000.

Required Explain how management can use the residual income method to motivate the St. Louis Division to make the investment.