Musicorum Ltd (Musicorum) is a multi-divisional company with interests spread across the music industry. Divisional managers are encouraged to act autonomously and identify, develop and pursue innovative investment opportunities. However, CEO John Fogerty is a little perplexed as divisional managers seem reluctant to invest in new projects. The performance of divisional managers is assessed using return on investment (ROI) where ROI is expected to increase each year. The prevailing ROI for Musicorum is 9.5% but Fogerty is determined to have this increase. Freya is the divisional manager of the Instrumentum division which engages in the design, production, distribution and marketing of a variety of musical instruments. Instrumentum has assets of $45 million and a current target ROI of 12.5%. Freya is looking forward to a favourable performance evaluation, to facilitate a high bonus. Freya has been presented with three investment opportunities to consider. Which (if any) does the current performance measurement system encourage her to pursue: A $5 million replacement of one of Instrumentum's production lines which has become unreliable The proposed replacement is an automated line that will produce higher quality product at lower operating costs. Significant training is required to get operating and maintenance crews up to speed. The investment is expected to yield an annual ROI of 11% for the first two years and 14% over the useful life of 6 years. Investment in none of the options is encouraged by the current performance measurement system An $8 million acquisition of a business with technology that would significantly enhance Instrumentum's current capabilities and open up new market opportunities. Instrumentum's engineers have advised that the acquisition is not expected to generate profits in the first year due to the cost of integration into Instrumentum's core operations. Over the life of the project the ROI is expected to be 15% O A $3 million refurbishment of one of Instrumentum's production lines to extend its useful life by at least 4 years. The investment is expected to yield an annual ROI of 13.5% for each of the 5 years, after which an upgrade will be required