Hoffman Ceramics, a division of Samson Corporation, has an operating income of $64,000 and total assets of $400,000. The required rate of return for the company is 11% The company is evaluating whether it should use rotum on investment (ROV) or fesidual income (Rs) as a measurement of performance for its division mandegers. The manager of Hoffman Ceramics hat the opportunity to undertake a new project that wit require nn imestment of $100,000. This imvostment would earn $14,000 for the company. Read the requirements. Requirement 1. What is the original foturn on investment (RiOl) for Hotiman Coramics (bofore making any additional investmene)? First detemine the formula to caloulate the ROI. Requirements 1. What is the original return on investment (ROI) for Hoffman Ceramics (before making any additional investment)? 2. What would the ROI be for Hoffman Ceramics if this investment opportunity were undertaken? Would the manager of the Hoffman Ceramics division want to make this investment if she were evaluated based on ROl? Why or why not? 3. What is the ROl of the investment opportunity? Would the investment be desirable from the standpoint of Samson Corporation? Why or why not? 4. What would the residual income (RI) be for Hoffman Ceramics if this investment opportunity were to be undertaken? Would the manager of the Hoffman Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Samson Corporation? Why or why not? 6. Which performance measurement method, ROI or RI, promotes goal congruence? Why? Hoffman Ceramics, a division of Samson Corporation, has an operating income of $64,000 and total assets of $400,000. The required rate of return for the company is 11% The company is evaluating whether it should use rotum on investment (ROV) or fesidual income (Rs) as a measurement of performance for its division mandegers. The manager of Hoffman Ceramics hat the opportunity to undertake a new project that wit require nn imestment of $100,000. This imvostment would earn $14,000 for the company. Read the requirements. Requirement 1. What is the original foturn on investment (RiOl) for Hotiman Coramics (bofore making any additional investmene)? First detemine the formula to caloulate the ROI. Requirements 1. What is the original return on investment (ROI) for Hoffman Ceramics (before making any additional investment)? 2. What would the ROI be for Hoffman Ceramics if this investment opportunity were undertaken? Would the manager of the Hoffman Ceramics division want to make this investment if she were evaluated based on ROl? Why or why not? 3. What is the ROl of the investment opportunity? Would the investment be desirable from the standpoint of Samson Corporation? Why or why not? 4. What would the residual income (RI) be for Hoffman Ceramics if this investment opportunity were to be undertaken? Would the manager of the Hoffman Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Samson Corporation? Why or why not? 6. Which performance measurement method, ROI or RI, promotes goal congruence? Why
