From the data it is clear that the new project for Munster is acceptable to the company as it offers a rate of return of 14% (7,000/50,000), which is greater than the cost of capital of 12%. However by taking on this project Munsters divisional ROI falls from 20% to 19.85%. This could lead to the Munster division rejecting the project. If the company’s cost of capital is 12% then Munster should take on this new project whereas Leinster should reject its project as it offer an ROI of 10% (10,000/100,000), 2% below the cost of capital. This is also very clear when focusing on residual income as the residual income figure taking into account the proposed projects for Munster increases by €1,000 whereas it decreases by €2,000 for Leinster . However things are not so clear using ROI appraisal measure. Based on this measure alone, management at Munster could reject the project as it reduces their ROI. This however would be a dysfunctional decision as the project is good for the company at large because it offers a positive residual income. Thus it would seem that the use of ROI can tempt managers away from the corporate profit objective whereas Residual income being an absolute measure should guide management to pursue a greater corporate profit objective.