Residual Income Is a Better Measure for Performance Evaluation of an Investment

Multiple Choice

Residual income is a better measure for performance evaluation of an investment center manager than return on investment because:

A) the problems associated with measuring the asset base are eliminated.
B) desirable investment decisions will not be rejected by divisions that already have a high ROI.
C) only the gross book value of assets needs to be calculated.
D) returns do not increase as assets are depreciated.