An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget. Details of those proposals are as follows.

	Capital Budget Proposals
	A				B				C
Capital required	$	96,000			$	60,000			$	180,000
Annual operating return		24,960				20,400				16,200

Shellforth uses residual income to evaluate all capital budgeting projects. Its minimum required return is 10 percent.

a-1. Assume you are the investment center manager. Calculate the residual income for each project?

a-2. Which project do you prefer?

b-1. Assume your investment centers current ROI is 18 percent and that the president of Shellforth is thinking about using ROI for the investment centers evaluation. Calculate the ROI for each project?

b-2. Would your preferences for the projects listed change?