Emily Adams is the manager of City Wide Door, a company specializing in installing and maintaining garage doors of many types. Her associate, Alyssa, has provided Emily with three proposals for different investments in machinery to help expand the business. The minimum required return on investments for City Wide Door is 12 percent.

If Emily uses ROI to evaluate investments:
a. Which proposal would be most profitable for the firm?
b. How would the answer change if the company used residual income to evaluateinvestments?

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Initial investment Annual operating return Proposal A $58,600 10,000 Proposal B $75,000 16,500 Proposal C $50,000 13,100