Creams of Tasmania Ltd manufactures cream for three different markets. The business has grown from a backyard hobby for the owners to quite a large manufacturing concern. The company is structured into three distinct divisions aligned with each market, as shown below.

	Body	Face	Baby
Sales	$4,720,000	$2,480,000	$6,300,000
Variable costs	33%	38%	50%
Fixed costs	$1,960,000	$1,800,000	$1,700,000
Divisional investment	$5,000,000	$4,000,000	$12,000,000

The management has come across a further investment opportunity. It does not want to develop a separate division, so one of the existing divisions would need to take responsibility for the new investment opportunity. Management estimates that the new investment opportunity would require an investment of $2,500,000 to deliver sales of $2,000,000, with variable costs estimated at $625,000 and fixed costs at $1,000,000.

Required:

1. At present, divisional performance is evaluated based on ROI. If this is the case, which division would want to take over the new investment opportunity?
2. If the company changed its performance evaluation criteria to encompass residual income based on a charge for capital of 14%, which division would want to take over the new investment opportunity?