The Plastics Division of Minock Manufacturing currently earns $$4\mathrm{.}25$ million and has divisional assets of $$25$ million. The division

manager is considering the acquisition of a new asset that will add to profit. The Investment has a cost of $$5,502,000$ and will have a

yearly cash flow of $$1,467,500.$ The asset will be depreciated using the straight$-$line method over a five$-$year life and is expected to

have no salvage value. DIvisional performance is measured using ROI with beginning$-$of$-$year net book values in the denominator. The

company's cost of capital is $7$ percent. Ignore taxes. The division manager learns that there is an option to lease the asset on a year$-$to$-$

year lease for $$1,162,000$ per year. All depreclation and other tax benefits would accrue to the lessor.

Required:

a$.$ What is the division's residual Income before considering the project?

b$.$ What is the dlvision's residual Income if the asset is purchased?

c$.$ What is the division's residual Income if the asset is leased?

Note: For all requirements, enter your answers in dollars, not in millions.