Please Use The Following Information To Answer Questions A5 And A6 A Division Of Pennywise Plc Maintains Its Capital Em 1 (225.61 KiB) Viewed 20 times
Please use the following information to answer questions A5 and A6. A division of Pennywise plc maintains its capital employed at £3,500,000 and has profit of £680,000 per annum. The division can increase their capital to acquire an asset costing £120,000 with an estimated useful life of five years, which will generate profit of £10,000 per annum after depreciation. The notional cost of capital is 22%. The new asset has no residual value. Note: Assume that working capital remains the same whether the asset is acquired or not. A5. Using average net asset value method, what is the return on investment for the division in the first year if the asset is acquired? 18.46% 19.12% 18.52% Jy 18.79%
(Information repeated for your convenience) Please use the following information to answer questions A5 and A6. A division of Pennywise plc maintains its capital employed at £3,500,000 and has profit of £680,000 per annum. The division can increase their capital to acquire an asset costing £120,000 with an estimated useful life of five years, which will generate profit of £10,000 per annum after depreciation. The notional cost of capital is 22%. The new asset has no residual value. Note: Assume that working capital remains the same whether the asset is acquired or not. A6. Assuming the new asset is not acquired, what will be the residual income or loss in the first year? O £20,000 O -£106,400 O-£90,000 O £149,600
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