China Group has a division with capital employed of 10 million that currently earns an ROI of
Question:
China Group has a division with capital employed of £10 million that currently earns an ROI of 15% per annum. It can make an additional investment of £2 million for a five-year life with no scrap value. The average net profit from this investment would be £280,000 per annum after depreciation. The division’s cost of capital is 9%.
Calculate the ROI and residual income for the:
• original investment;
• additional investment; and
• total new level of investment.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Accounting For Managers Interpreting Accounting Information For Decision Making
ISBN: 9780470016091
2nd Edition
Authors: Paul M. Collier
Question Posted: