Points to stress The netbook value method’s declining denominator works to increase ROI as assets age, ceteris paribus. Evaluating managers on the basis of net assets rather than gross assets exacerbates incentives for retaining old PPE rather than investing in new PPE. Choosing targeted levels of performance and timing of feedback The discussion of benchmarks for performance evaluation points out that judicious selection of benchmarks or targets can help offset shortcomings with traditional, historical-cost-based ROI, RI or EVA ® measures. For example, since older assets valued at historical cost inflate ROI particularly if investment is defined as net rather than gross assets, management may set higher target ROIs for divisions with older assets.
