When a company uses return on investment as a

performance metric, managers have an incentive to

invest only in projects

a)that increase the return on investment of their

segment or division

b) that have a retur on investment that exceeds the

cost of capital of their segment or division

c)that decrease the return on investment of their

segment or division

d)that have a return on investment that is less than

the cost of capital of their segment or division

Can you please provide a full explenation? If ROI is the only variable taken into account when it comes to manager compestation why would a manager care about the cost of capital and not only on ROI. Basically my question is why would it be b) and not a).