Question
Kayu Malaysia Berhad has a subsidiary firm called Syarikat Kenanga Sendirian Berhad (KSB) (KMB). The return on investment (ROI) is used by KSB as a
Kayu Malaysia Berhad has a subsidiary firm called Syarikat Kenanga Sendirian Berhad (KSB) (KMB). The return on investment (ROI) is used by KSB as a performance indicator. An investment was defined by this corporation as the average of the opening and closing asset balances. Aside from that, the management pays bonuses based on their ROI success. All investments are anticipated to generate a minimum annual return of 20%.
KSB had an investment opportunity in 2016 with an expected return of 18 percent. The KSB management was opposed to the investment choice because they feared it would reduce the division's ROI. The KSB division earnings is expected to be RM 2,640 million at the end of 2016, with assets predicted to be RM 18,000,00, which is a 1/3 decline from the 2015 year end balance.
Required:
a) For both divisions of the KSB, calculate the return on investment (ROI) and residual income (RI) for 2016.
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