a. Calculate the return on investment and residual income (10% W.A.C.C.) for each project.

b. If the investment manager is currently making a return on investment of 16 percent, which project(s) would the manager want to pursue, assuming his/her compensation is directly tied to average return on investment? Explain.
c. If the cost of capital is 10 percent and the annual earnings approximate cash flows excluding finance charges, which project(s) should be chosen? Explain.

Project Initial Investment Annual Earnings
A $800,000 $90,000
B 100,000 20,000
C 300,000 25,000
D 400,000 60,000