Answer:
A. Increase in amount of return on investment desired
Step-by-step explanation:
The residual income is a superior measure to return on investment of he performance of a division and its manger.
Residual income is the excess of the net income of a division over the opportunity cost of the capital invested into operating the assets of the division.
Residual income = Net income - (Required rate of return × Operating assets)
For example, lets consider the following data
Net income = 300,000
Assets = 500,000
Required rate of return = 10%
Residual income = 300,000 - (10% × 500,000) = 250,000
If the require rate of return is increased to 15%, then will reduce to
Residual income= 300,000 - (15% × 500,000) = 225,000
In the options given, an increase in the amount of require rate of return would decrease performance while others would increase it
Answer :A. Increase in amount of return on