Ranadi Cat Food Company has two divisions, the Bengal Cat Division and the Toyger Cat Division. Operating results for the two divisions are as follows:

	Bengal Cat Division	Toyger Cat Division
Net Operating Income	$20,000	$12,000
Average Operating Assets	$100,000	$84,000

The required rate of return, which is equal to the cost of capital, is 10%. A project with a return of $40,000 on an investment of $260,000 exists.

Required

If the divisions are evaluated based on return on investment, which division(s) would you like to accept the project?

If the divisions are evaluated based on residual income, which division(s) would you like to accept the project?