Issues in designing ROI measures. The Lincoln Corporation manufactures and sells a patented electronic device for detecting burglaries. The firm uses return on investment as a measure for the control of operations for each of its 16 U.S. divisions.

Recently the firm has organized a new division in Brazil. Lincoln contributed the necessary capital for the construction of manufacturing and sales facilities in Brazil, whereas it obtained debt financing locally for working capital requirements. The new division will remit annually the following amounts to the U.S. central corporate office:

(l)a royalty of $10 for each burglary device sold in Brazil, (2) a fee of $40 per hour plus traveling expenses for central corporate engineering services used by the division, and (3) a dividend equal to 10 percent of the capital Lincoln committed. The division will retain for its own use the remaining funds that operations generate. The division will receive the right to produce and market in Brazil any future electronic devices the central corporate research and development staff develops.

List some of the questions that the firm must address in designing an ROI measure for this division.