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QUESTION Haulage Ltd , a transport company, is planning its future investment strategy. Haulage's best projections of profit outcome are dependent upon the cost of

QUESTION
Haulage Ltd, a transport company, is planning its future investment strategy. Haulage's best
projections of profit outcome are dependent upon the cost of fuel as shown below.
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.
(4 Marks)
(c) If residual income is used for assessing performance, determine the optimal
investment level.
(4 Marks)
(d) State any three (3) advantages for each of using residual income and ROI as
measures of performance.
(5 Marks)
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