Magna Products pic has three divisions, A, B and C. The current investments in and net profits earned by each division are as follows:

Each division has put forward to the parent board a capital expenditure proposal for £50,000. Each division expects to produce net profits of £500,000 from that investment. Magna's cost of capital is 7% p.a. Use ROI and RI calculations to:
• Evaluate the current performance of each division
• Evaluate which proposal the board should approve if finance limits the decision to a single proposal.

Transcribed Image Text:

Division A Investment Net profit Division B Investment Net profit Division C Investment Net profit 1,000,000 75,000 1,500,000 90,000 2,000,000 150,000