1)A division of a toy company has net income of $2,000, short-term debt of $2,000, long-term debt of $5,000 and shareholder's equity of $20,000. The division has the opportunity to invest in a new line of collectible cards, which would increase its short-term debt to $3,000, long-term debt to $15,000 and net income to $2,600. The overall cost of capital for the toy division's holding company is 7%. What is the current and proposed ROI for the division, and, if the estimates are correct, which of the following should the division do?

a.8% now and 7.4% after investment; fund the investment only if it has a positive net present value.

b.7.4% now and 6.8% after investment; reject the investment even if it has a positive net present value.

c.8% now and 7.4% after investment; reject the investment even if it has a positive net present value.

d.7.4% now and 6.8% after investment; fund the investment only if it has a positive net present value.