Everton Ltd manufactures a range of sports equipment. It evaluates its divisions based on their Return on Investment (ROI). The three top managers in each division receive a bonus of $10,000 for every percentage point that their division exceeds the group target of 15%.

Currently, the Goodison division is on target to make a return of 18% this year. The manager of this division (Mrs Ferguson) is evaluating a investment proposal estimated to return 17%.

The Goodison divisions Chief Financial Officer, Ms Baines, advises to undertake the investment as it should return in excess of the group target of 15%.

However the third top manager, Operations manager Mr Patel says Dont undertake the investment as it will lower our divisional ROI to under the currently projected 18% and therefore lower our bonuses.

What should Mrs Ferguson do?

Would her decision be different if a Residual Income (RI) measure was adopted instead?