The manager of the recently formed Oak Division of Parkes, Incorporated, is evaluating the following four investment opportunities available to the division. Parkes, Incorporated, requires a minimum return of 10 per cent.

Investment Opportunity	Income	Investment
1	91 000	650 000
2	63 000	700 000
3	59 400	540 000
4	117 600	980 000

Parkes, Incorporated, has another division, Ash, which is managed by a divisional manager who has the power to make all investment decisions within the division. The manager of Ash division has argued that using residual income (RI) to make investment decisions would result in better goal congruence throughout the company.

Required:

a.	Calculate the return on investment (ROI) for each investment opportunity. (4 marks)
b.	If only one investment opportunity can be funded and the division is evaluated based on ROI, which investment opportunity would be accepted? (1 mark)
c.	If Parkes, Incorporated, can fund all of the projects and wishes to achieve the best possible performance, which investments would be accepted? (2 marks)
d.	Comment on the results in requirement c. taking into consideration the view of Ashs manager about residual income in making investment decisions. (3 marks)