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please show workings Self-assessment question 10.04 A Division of Broadwater plc maintains its capital employed at 200,000 and has profit after depreciation of 40,000 p.a.

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Self-assessment question 10.04 A Division of Broadwater plc maintains its capital employed at 200,000 and has profit after depreciation of 40,000 p.a. They can increase their capital to acquire an asset costing 50,000 with a 5 year life and no residual value, which will general profit of 6,500 p.a. after depreciation The notional cost of capital is 14% a)Calculate ROI before the investment and during the first year using the new asset (using the average asset value for the year) b)Calculate Residual Income for the same periods c) Using the results of (a) and (b) comment on whether the divisional manager would choose to invest in the asset d) Why might profit (without reference to capital employed) be the most common measure of divisional performance

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