Brummy Limited consists of several investment centres. One investment centre, the 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%.

a. Calculate Green’s ROI currently, for the additional investment, and after the investment.

b. How will Green and Brummy view this investment opportunity?

c. Calculate the effect of the new investment opportunity on Green’s residual income.