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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
An investment center in Shellforth Corporation was asked to identify three proposals for its capital
budget. Details of those proposals:
Capitol Budgets Proposal
  A B C
Capital required $80,000 $50,000 $150,000
Annual operating return 24,000 16,000 15,000
Shellforth uses residual income to evaluate all capital budgeting projects. Its minimum required
return is 12 percent.
a. Assume you are the investment center manager. Which project do you prefer? Why?
b. Assume your investment centerAc€?cs current ROI is 18 percent and that the president of Shellforth
is thinking about using ROI for the investment centerAc€?cs evaluation. Would your preferences for
the projects listed above change? Why?
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