Hewitt Ltd$,$ a transport company, is planning its future investment strategy. Hewitt$$s best projections of profit outcome are dependent upon the cost of fuel.

Annual net income at the following costs per litre

Investment level K$1,200$ K$1,250$ K$1,300$ K$1,400$ K$1,500$

$($K$$m$)($K$$m$)($K$$m$)($K$$m$)($K$$m$)($K$$m$)$

$3505552464030$

$4006058524635$

$4506863554735$

$5007268584934$

$5507467564330$

$6007564534025$

Probability $0\mathrm{.}10\mathrm{.}10\mathrm{.}40\mathrm{.}30\mathrm{.}1$

The company$$s minimum required rate of return is $10\%$ p$.$a$.$

$($a$)$ For each level of investment, compute the return on investment $($ROI$)$ and the residual income $($RI$).(12$ Marks$)$

$($b$)$ If the company uses ROI as a measure of performance, determine the optimal level of investment. $(2$ Marks$)$

$($c$)$ If residual income is used for assessing performance, determine the optimal investment level. $(4$ Marks$)$

$($d$)$ State any two $(2)$ advantages for each of using residual income and ROI as measures of performance. $(2$ Marks$)$