The current profit for a subunit is $36,000. Its current invested capital is $200,000. The subunit is considering purchasing for $20,000 equipment that will increase annual profit by an estimated $2,800. The firm's cost of capital is 12%. If the equipment is purchased, what will be the increase in residual income of the subunit?

Practice Question options:

a)4%

b)$16,000

c)$2,800

d)$400