Magna Products PLC 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 500,000 Each division expects to produce net profits of 40,000 from that investme...

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Magna Products PLC has three divisions, A, B and C. The current investments in and net profits

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

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Each division has put forward to the parent board a capital expenditure proposal for £500,000. Each division expects to produce net profits of £40,000 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.

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Accounting For Managers Interpreting Accounting Information For Decision Making

ISBN: 9780470016091

2nd Edition

Authors: Paul M. Collier

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Question Posted: May 29, 2024 01:01 AM

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Magna Products PLC has three divisions, A, B and C. The current investments in and net profits

Question:

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

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Accounting For Managers Interpreting Accounting Information For Decision Making

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