NamBank has identified business opportunities in two SADC markets, a research was commissioned and following data were produced.

Angola Botswana

Income expected N$ 1.7 mil N$ 1.2 mil

It is expected that NamBank would have to make initial investment of N$ 11 mil & N$ 6 mill with respect to Angola and Botswana. The companys overall required return on its investments is 16%.

REQUIRED: Marks

4.1. Define the term Residual Income and why it may be a better measure of performance than Return on Investment. 4

4.2. Indicate in which business environments it may be more appropriate for a successful divisionalization. 1

4.3. Using the Residual Income method, advice NamBank which investment to pursue on. 5

TOTAL MARKS 10