The division manager of Paint Corp. is considering the purchase of new equipment, which

would modernize an aging plant. The division$$s current asset base is $$10,000,000$ and operating

income equals $$1,800,000.$ The investment in new equipment is $$1,500,000$ and will increase

operating income by $$132,000$ next year. Paint Corp's required rate of return on investments is

$6\mathrm{.}0\%$

a$.$ What is the division$$s current ROI?

b$.$ What is the division ROI if the new equipment is purchased?

c$.$ If the division manager is compensated on a base salary plus a bonus based on division ROI, is the

manager's compensation higher or lower with the new investment?

d$.$ In this example for Paint Co$.$ does the ROI performance measure promote goal congruence? Explain your answer based on your analysis above