D. Below is the respective cost of capital for each investment opportunity (based on different level of project risks):

Investment

Opportunities Income Investment Cost of Capital

1 $57,600 $ 640,000 6%

2 $75,000 $ 600,000 8%

3 $60,000 $ 1,000,000 4%

4 $59,500 $ 850,000 7%

1. Calculate Economic Value Added (EVA) for each of the investment opportunity. Current corporate tax rate at 20%. (2 marks)

2. Refer to Part (i) EVA calculation, which investment /opportunity(s) would you recommend the division manager to accept and why (2 marks)