Can you check my answers for these two questions. I completed the work but the teacher advised me that either answer is correct. He gave me this feed back for 25.5 :

For 25.5 you will want to complete the residual income for all the projects A, B, and C and show your formulas or at least the residual income for each.

For Part B you will want to show your calculations for ROI for all three A, B and C to back up your answer

And 25.4

For 25.4 you the formula correct however (6,000,000 - 500,000) does not equal 55,000,000. Nor does( 8,750,000 - 1,750,000) equal 70,000,000

Thanks

For 25.4 you the formula correct however (6,000,000 - 500,000) does not equal 55,000,000. Nor does( 8,750,000 - 1,750,000) equal 70,000,000 E25.4 Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown below. The company's weighted-average cost of capital is 12 percent. Division A Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Division B $6,000,000 $8,750,000 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 1,750,000 After-tax operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,180,000 ROI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% 14% a. Which division is more profitable? Division A is more profitable as the return on investment is higher. b. Would EVA more clearly show the relative contribution of the two divisions to the company as a whole? Show the computations. A = 1,000,000 - 55,000,000 * 12% = 5,600,000 B = 1,180,000 - 70,000,000 * 12% = 7,220,000 c. Suppose the manager of Division A was offered a one-year project that would increase his investment base by $250,000 and show a profit of $37,500. Would the manager choose to invest in the new project? Yes, the manager should decide to invest because division A will increase in EVA. For 25.5 you will want to complete the residual income for all the projects A, B, and C and show your formulas or at least the residual income for each. For Part B you will want to show your calculations for ROI for all three A, B and C to back up your answer E25.5 An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget. Details of those proposals are: Capital Budget Proposals___________________ A Capital required . . . . . . . . . . . . . . . . . . . $80,000 Annual operating return . . . . . . . . . . . . . . 24,000 B $50,000 16,000 C $150,000 15,000 Shellforth uses residual income to evaluate all capital budgeting projects. Its minimum required return is 12 percent. a. Assume you are the investment center manager. Which project do you prefer? Why? Since the residual income is greater, I would choose Project B to invest. b. Assume your investment center's current ROI is 18 percent and that the president of Shellforth is thinking about using ROI for the investment center's evaluation. Would your preferences for the projects listed above change? Why? No preference wouldn't change I would stick with Project B since the ROI is higher