Axel Corporation (which has a weighted-average cost of capital of 12%) has two divisions with the following information:

	Beta Division	Cal Division
Total Assets	$720,000	$550,000
Current Liabilities	$220,000	$110,000
After-Tax Operating Income	$105,000	$110,000
ROI	15%	20%

Each manager is offered an investment project opportunity that would increase each division's investment base by $10,000 and generate an additional profit for each division of $1,800. Which of the following is true?

Multiple Choice

• If the managers are evaluated based on their divison's ROI, Beta would accept the project but Cal would reject it.

• If the managers are evaluated based on their divison's ROI, Cal would accept the project but Beta would reject it.

• If the company rewards managers for accepting any project with positive residual income, and the company's target return for projects is 20%, both division managers would accept the project.

• If the compay rewards managers for accepting any project with positive residual income, and the company's target return for projects is 15%, both division managers would reject the project.