Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

I need the answer as soon as possible At the end of 20X3, Division S (part of a group) had a book value of non-current

I need the answer as soon as possible image text in transcribed

At the end of 20X3, Division S (part of a group) had a book value of non-current assets of $300,000 and net current assets of $40,000. Net profit before tax was $64,000. The non-current assets of Division S consist of five separate items, each costing $60,000, which are depreciated to zero over 5 years on a straight-line basis. On 31 December of each of the past years, Division S has bought a replacement for the asset that has just been withdrawn and it proposes to continue this policy. Because of technological advances, the asset manufacturer has been able to keep his prices constant over time. The group's cost of capital is 15%. Required Assuming that, except where otherwise stated, there are no changes in the above data, deal with the following separate situations. (a) Division S has the opportunity of an investment costing $60,000, and yielding an annual profit of $10,000. (i) Calculate its new ROI if the investment were undertaken. (ii) State whether the manager of division S would recommend that the investment be undertaken

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Ray Garrison, Eric Noreen and Peter Brewer

14th edition

978-0078111006

Students also viewed these Accounting questions