Brummy pic consists of several investment centres. Green Division has a controllable investment of £750,000 and profits are expected to be £150,000 this year. An investment opportunity is offered to Green that will yield a profit of £15,000 from an additional investment of £100,000. Brummy accepts projects if the ROI exceeds the cost of capital, which is 12%.

• Calculate Green's ROI currently, for the additional investment and after the investment.

• How will Green and Brummy view this investment opportunity?

• Calculate the effect of the new investment opportunity on Green's residual income.