Brian Lochte Operates a Popular Water Park The Camp's Weighted-Average Cost of Capital Is 10%,and Brian Requires

Brian Lochte operates a popular water park.Projections for the current year are as follows:
$\begin{array}{lr}\text { Sales revenue } & \$ 8,000,000 \\\text { Operating income } & \$ 700,000 \\\text { Average total assets } & \$ 4,000,000\end{array}$
The camp's weighted-average cost of capital is 10%,and Brian requires that all new investments generate a return on investment of at least 13%.

At last week's board meeting,Brian told the board that he had up to $50,000 to invest in new facilities at the Park and asked them to recommend some projects.Today the board's president presented Brian with the following list of three potential investments to improve the camp facilities.
$\begin{array}{lcccr} & \underline{\textbf { Wading Pool }} & & \underline{\textbf { Diving Pool }} &\underline{\textbf { Hot Tub }} \\\text { Incremental operating income } & \$ 3,250 & & \$ 4,800 &\$ 2,700 \\\text { Average total assets } & 25,000 && 45,000 & 16,000\\\end{array}$

Required
a.Calculate the residual income and economic value added for each of the three projects.
b.Which of the three projects do you recommend Brian undertake? Why?