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Performance and ROI versus Residual Income An investment center in Shellforth Corporation was asked to identify three proposals for its capital

05 / 03 / 2018 Assignment

This paper circulates around the core theme of Performance and ROI versus Residual Income An investment center in Shellforth Corporation was asked to identify three proposals for its capital together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 45. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.

Performance and ROI versus Residual Income

An investment center in Shellforth Corporation was asked to identify three proposals for its capital

Capital Budget Proposals

A B C

Capital required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,000 $50,000 $150,000

Annual operating return . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000 16,000 15,000

Shellforth uses residual income to evaluate all capital budgeting projects. Its minimum required

return is 12 percent.

a. Assume you are the investment center manager. Which project do you prefer? Why?

b. Assume your investment center’s current ROI is 18 percent and that the president of Shellforth

is thinking about using ROI for the investment center’s evaluation. Would your preferences for the projects listed above change? Why?


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