Question
Jurong Prefabricated Construction (JPC) in 2021 achieved a net profit of $760,000 and had total assets of $4,000,000. Their minimum required rate of return is
Jurong Prefabricated Construction (JPC) in 2021 achieved a net profit of $760,000 and had total assets of $4,000,000. Their minimum required rate of return is 18%. Required: a) Determine residual income (RI) and return on investment (ROI) for JPC. (3 marks) b) JPC is considering an investment of $140,000 in a venture that will make a yearly net profit of $25,900. Would it be in the best interests of JPC to make this investment? Explain. (4 marks) c) JPC is considering an investment of $140,000 in a venture that will make a yearly net profit of $25,900. If the JPC business unit planning to make the investment currently has a return on investment of 22% and its manager is assessed using the unit's ROI, will the business unit manager be motivated to request funds to make this investment? Explain. (4 marks) d) JPC is considering an investment of $140,000 in a venture that will make a yearly net profit of $25,900. If the JPC business unit planning to make the investment currently has a residual income of $125,000 and its manager is assessed using the unit's residual income, will the business unit manager be motivated to request funds to make this investment? Explain.
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