Which of the Following Is a Drawback to Using Return

Multiple Choice

Which of the following is a drawback to using return on investment (ROI) to assess performance by managers?

A) Managers of investment centers with high ROIs may reject projects with expected returns that exceed the corporation's cost of capital.
B) Managers of investment centers with high ROI's may overinvest in projects with expected returns that exceed the company's cost of capital.
C) Use of ROI measures may induce managers to rely too heavily on equity as opposed to debt when financing projects.
D) All of the above are disadvantages associated with the use of ROI.