Sports Co is a manufacturing company and uses Return on Investment $($ROI$)$ to assess the performance of its divisional managers. Its current target ROI is $10\%,$ which is equivalent to its cost of capital. One of Sports Co divisions is division C$,$ which had achieved a ROI of $15\%$ last year.

The purchase of a new machine has been proposed by a member of staff working in division C$.$ It is estimated that the new machine would generate a profit of $96,000$ per annum for an investment of $800,000.$

Required:

I. Using ROI as the current method of performance assessment, discuss whether the manager of Division C is likely to accept or reject purchase of the new machine and why?

II$.$ Will this decision be a benefit to or detrimental to the company?

III. Would the manager$$s decision remain the same if the performance was assessed on Residue Income $($RI$)$ and why.