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2don't attempt if you aren't confident in your ability. will thumbs down incorrect answers. The Plastics Division of Minock Manufacturing currently earns $3.48 million and
2don't attempt if you aren't confident in your ability. will thumbs down incorrect answers.
The Plastics Division of Minock Manufacturing currently earns $3.48 million and has divisional assets of $24 million. The division nanager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $5,490,000 and will have a jearly cash flow of $1,464,500. The asset will be depreciated using the straight-line method over a five-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book values in the denominator. The company's cost of capital is 7 percent. Ignore taxes. Required: a. What is the divisional ROI before acquisition of the new asset? b. What is the divisional ROI in the first year after acquisition of the new asset? Note: For all requirements, enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1)Step by Step Solution
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