Honolulu Enterprises has two decentralized divisions (Coconut and Guava) that have decision making responsibility over the amount of resources invested in their divisions. Recent financial extracts for both divisions are presented below:

	Coconut			Guava
Fixed assets, gross	$	4,500		$	7,200
Accumulated depreciation	$	2,700		$	2,160
Other assets	$	900		$	1,350
Liabilities	$	900		$	1,800
Sales	$	12,150		$	12,960
Net income after tax*	$	1,330		$	1,810
Average age of fixed assets (years)		15			5

*Net income is after tax but before interest

Honolulu's weighted average cost of capital (WACC) is 15% and the company uses residual income as a method to evaluate performance. Which of the following statements is correct? Please support your answer with calculations to receive full credit.

A. Coconuts ROI will be raised by divesting of a project with a 20% ROI but its RI will be lower.

B. Coconuts RI will decrease by taking on a project with a $12 cost and net income before interest of $3.

C. Guavas RI will increase by taking on a project with an $8 cost and net income before interest of $1.1.

D. Coconuts RI is less than Guavas RI.

E. None of the choices are correct