An investment centre has net assets of $\$ 800,000$, and made profits before interest of $\$ 160,000$. The notional cost of capital is $12 \%$. This is the company's target return.

An opportunity has arisen to invest in a new project costing $\$ 100,000$. The project would have a four-year life, and would make profits of $\$ 15,000$ each year.

Required:

(a) What would be the ROI with and without the investment? (Base your calculations on opening book values). Would the investment centre manager wish to undertake the investment if performance is judged on $\mathrm{ROI}$ ?

(b) What would be the average annual RI with and without the investment? (Base your calculations on opening book values). Would the investment centre manager wish to undertake the investment if performance is judged on RI?