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 the segment or division
B) that decrease the return on investment of the segment or division
C) that have a return on investment that exceeds the cost of capital of the segment or division
D) that have a return on investment that is less than the cost of capital of the segment or division

Question

Quizplus · Accepted Answer

Managers are incentivized to invest in projects that increase the return on investment of their segment or division, as this will reflect positively on their performance metrics.

When a Company Uses Return on Investment as a Performance