Department income totals $400,000, investment in the department is $4,000,000, and the company's cost of capital is 8%.

Required:

a) Calculate the return on investment (ROI).

b) Calculate economic value added.

c) Assume there is a capital project that requires a $400,000 investment for a $36,000 return. Would the department manager be more likely to accept the project if department performance was evaluated using ROI or economic value added? Why?