Consider the following information about a potential project:

Investment required ...........................................$2,000,000

Expected annual project revenue .......................$3,600,000

Expected annual project expenses .....................$3,200,000

Required rate of return .................................................12%

Current division return on investment 18%

a) Calculate the project’s return on investment.

b) Based solely on ROI, is this project in the firm’s best interests? Why or why not?

c) Is this project in the division manager’s best interests? Why or why not?

d) Perform DuPont Analysis on this project

e) What is the project’s residual income?