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Economic Value Added

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Top managements measures your division's performance by calculating the division's return on investment (ROI), defines as division-operating income per period divided by division assets. Your division has done some quite well lately; its ROI is 30%. You believe the division should invest in a new product process, but colleague disagree, pointing out that because the investment's first year ROI is ONLY 25%, it will hurt performance. How would you respond?

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I will respond it by saying that we should look whether the new product process has added value or not in long term , We should just not only see the first year ROI. Infact the forecasted ROI for say first 5 years can be averaged and if it is higher we can accept.
Another way of measuring the performace is to ...

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