China Group has a division with capital employed of 10 million that currently earns an ROI of
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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 following:
• Original investment
• Additional investment
• Total new level of investment
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