A corporation has set a goal to increase its return on investment (ROI). To facilitate this
goal, the corporation has set up an incentive program that rewards each division for
increasing its ROI. One possible downfall of this incentive program is that it will

Answer (D) is correct.
A major problem with using ROI is that an investment center with a high ROI may not accept a profitable investment even though the investment’s return is higher than the center’s target ROI. An investment center has a 7% ROI, and its investors expect 3% (the target return). The decision maker may reject a project earning 5% even though the project exceeds the target.