Contest SportsCorporation is considering an opportunity to undertake a new project within the Extreme Sports Division requiring an investment of $164,000 which could earn the company $21,320. Contest Sports' required rate of return is 10%.

Prior to making this investment, the Extreme Sports division's Return on Investment (ROI) is 20%. The new investment opportunity would provide an ROI of 13%, causing the overall division's ROI to drop to 18%. The new opportunity would provide a Residual Income (RI) of $4,920,increasing the totaldivision's RI to $45,920.

Comment on the desirability of taking on this new opportunity considering the viewpoints as noted in the questions below.

1. The manager of Extreme Sports is evaluated based on the division's ROI. Would the manager of the division be in favor of making this investment?

2. The manager of Extreme Sports is evaluated on the division's RI. Would themanager of the division be in favor of making this investment?

3. Which performance measurement will promote goal congruence between the division manager and the top company management, leading to an agreement on the investment decision? Using the selected measurement, is the opportunity desirable?