Question
Division A of Nissan Ltd currently has capital employed of OMR 150,000 and earns an annual profit after depreciation of OMR 36,000. The divisional manager
Division A of Nissan Ltd currently has capital employed of OMR 150,000 and earns an annual profit after depreciation of OMR 36,000. The divisional manager is considering an investment of OMR 33,000 in an asset which will have a ten-year life with OMR 3,000 residual value and will earn a constant annual profit after depreciation of OMR 3,200. The cost of capital is 12%.
Required:
- Calculate the return on divisional investment before and after the new investment.
- Calculate the divisional residual income before and after the new investment.
- Critically differentiate the ROI and RI in evaluating the performance.
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Every Womans Guide To Personal Finance
Authors: Rosanna Spero
1st Edition
0948035153, 9780948035159
