1. What are the advantages of using the ROI measure rather than the value of division profits as a performance evaluation technique?
2. Under what conditions would the use of ROI measures inhibit goal-congruent decision making by a division manager?
3. What are the advantages of using economic value added (EVA1) instead of ROI?
4. Describe why the ‘‘general transfer pricing rule'' will lead to the decision that benefits the company as a whole in the case where the selling division is under capacity.