Polyester division of Quintex Ltd has forecast a net profit before tax of R3 million per annum for the next five years, based on net capital employed of R10 million. Plant replacement over this period is expected to be equal to the annual depreciation each year. These figures compare well with the groups required rate of return of 20% before tax.Polyesters management is currently considering a substantial expansion of its manufacturing capacity to cope with the forecast demands of a new customer. The customer is prepared to offer a five-year contract providing Polyester with annual sales of R1.8 million. In order to meet this contract, a total additional capital outlay of R2 million is envisaged, being R1.4 million of new fixed assets plus R0.6 million of working capital. The plant life is expected to be 5 years with zero scrap value. Operating costs for the contract are estimated to be R1.20 million per annum, excluding depreciation. This is considered to be a low-risk venture as the contract would be firm for 5 years and the manufacturing processes are well understood within Polyester. The consequences of income tax on the proposal may be ignored. Required: Part one Calculate the impact of accepting the contract on Polyester divisions: Return on investment (ROI) for each of the 5 years Residual income (RI), using 20% imputed interest rate, using average capital employed per annum.