6. Which of the following formulas represents the residual income? a. Residual income = Adjusted divisional income - Adjusted investment base b. Residual income = Divisional income Residual income - After-tax income - Cost of capital d. Residual income - After-tax income - Cost of invested capital 7. A division reports the residual income in the amount of $95,000, after-tax income in the amount of $410,000, and the investment base in the amount of 52,100,000. What is the cost of capital used in the calculation? a. 14% b. 159 c. 169 d. 17 8. Which of the following statements regarding EVA is incorrect? 2. EVA is a concept closely related to residual income b. EVA is a ratio. C. EVA corrects for many of the accounting distortions that make the other measures myopic. d. It is difficult to implement EVA. 9. Which of the following statements is incorrect? 3. Using the beginning balance of the investment base could encourage asset acquisitions at the end of the year. b. Measuring the manager only on the division's results risks suboptimal decision making. c. In general, how a performance measure is used is more important than how it is calculated. d. As long as the measurement method is understood, it can enhance performance evaluation. 10. Which of the following statements regarding the measurement of the investment base is correct? a. Current cost is the original cost to purchase or build an asset. b. When ROI is used in conjunction with the nel book value method, the ROI increases each year ever though no operating changes lake place. C. ROI decreases each year under the historical cost method even though no operating changes take place. d. It is easier and less expensive to deal with current costs than to deal with historical costs. Which of the following approaches will improve ROI? a. Increase sales. b. Reduce costs effectively, C. Reduce the assets used to generate income. d. All of the above. 11. Which of the following statements regarding suboptimization is incorrect? a. The use of ROI can give incentives to managers that lead to lower organizational performance. b. The use of residual income reduces the suboptimization problem. CEVA solves the suboptimization problem. d. Suboptimization is due to the misalignment of interests between the managers and the organization