for its division managers. The manager of Hoffman Ceramics has the opportunity to undertake a new project that will require an investment of $$150,000.$ This investment would earn $$22,500$ for the company.

Read the requirements'.

Requirement $1.$ What is the original return on investment $($ROI$)$ for Hoffman Ceramics $($before making any additional investment$)?$

First determine the formula to calculate the ROI.

$($Enter the percentage to two decimal places.$)$

The original return on investment $($ROI$)$ for Hoffman Ceramics is

If this investment opportunity were undertaken, the ROI would be $\%.$

If the manager of this division is evaluated based on ROI she $(3)$ want to make this investment. Investing in the new project would $(4)$ tivision's ROI.

Requirement $3.$ What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of LaChut Corporation? Why or why not? $($Enter the percentage to two decimal places.$)$

The ROI of the investment opportunity is $,\%.$

From the standpoint of LaChut Corporation this investment $(5).$ desirable. The ROI of the investment opportunity $(6)$ LaChut's required rate of return.

First determine the formula to calculate the RI$.$

$($Use parentheses or a minus sign for a negative RI$.)$

The residual income $($RI$)$ for Hoffman Ceramics if this investment opportunity were to be undertaken is

If the manager of this division is evaluated based on RI she $(10).$

want to make this investment. The $(11$

$Rl$ indicates that the division is earning $(12)$

than management's expectations.

Requirement $5.$ What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of LaChut Corporation? Why or why not? $($Use parentheses or a minus sign for a negative RI$.)$

The RI of the investment opportunity is

From the standpoint of LaChut Corporation this investment $(13)$

desirable. The RI of the investment opportunity is $(14)$

$,$ meaning the investment opportunity would earn $(15)$

than management's target required return.

Requirement $6.$ Which performance measurement method, ROI or RI$,$ promotes goal congruence? Why?

Of the two performance measurement methods, ROI and RI$,(16)$

the division's RI by that amount. This would motivate both the division manager and the company management to