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Which of the Following Is a Legitimate Disadvantage of Residual

Question 29

Multiple Choice

Which of the following is a legitimate disadvantage of residual income?


A) It does not explicitly capture cost of capital in the computation of the measure.
B) It does not encourage managers to accept all projects above the minimum return.
C) It is not an effective basis for comparing divisions of substantially different sizes
D) It does not provide any new information beyond ROI.

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