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ROI and Residual Income

The following investment opportunities are available to an investment center manager:

$\backslash$begin$\{$tabular$\}\{$lll$\}$

Project & Initial Investment & Annual Earnings $\backslash \backslash$

$\backslash$hline$\backslash ($ A $\backslash )$ & $\backslash (\backslash$$ $800,000\backslash )$ & $\backslash (\backslash$$ $90,000\backslash )\backslash \backslash$

$\backslash ($ B $\backslash )$ & $100,000$ & $20,000\backslash \backslash$

$\backslash ($ C $\backslash )$ & $300,000$ & $25,000\backslash \backslash$

$\backslash ($ D $\backslash )$ & $400,000$ & $60,000$

$\backslash$end$\{$tabular$\}$

Required:

a$.$ If the investment manager is currently making a yearly return on investment of $16$ percent, which project$($s$)$ would the manager want to pursue based on this roi?

b$.$ If the cost of capital is $10$ percent and the annual earnings approximate cash flows excluding finance charges, which project$($s$)$ should be chosen based on cost of capital?

c$.$ Suppose only one project can be chosen and the annual earnings approximate cash flows excluding finance charges. Which project should be chosen?