Division M is a division of MR plc. The following data relate to Division M. Net assets Annual profit $20,000,000 $5,000,000 15% per annum Cost of capital MR plc is considering two proposals. Proposal 1 Invest a further $2,000,000 in non-current assets to earn an annual profit of $400,000. Proposal 2 Dispose of non-current assets at their net book value of $5,500,000. This would lead to profits falling by $1,000,000 per annum. Proceeds from the disposal of these non-current assets would not be credited to Division M (but to the Holding Company of MR plc instead).

Division M is a division of MR plc. The following data relate to Division M. Net assets Annual profit $20,000,000 $5,000,000 15% per annum Cost of capital MR plc is considering two proposals. Proposal 1 Invest a further $2,000,000 in non-current assets to earn an annual profit of $400,000. Proposal 2 Dispose of non-current assets at their net book value of $5,500,000. This would lead to profits falling by $1,000,000 per annum. Proceeds from the disposal of these non-current assets would not be credited to Division M (but to the Holding Company of MR plc instead).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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