Paints Division of PorEleben, Inc. had the following operation result in 2019: Sales: P12,000,000 Profit Margin: 20% Assets P15,000,000 The Division is considering a P2,000,000 investment in a new project. The estimated ROI for all its operations would be 30% with the new investment. The weighted average cost of capital is 15% 1. How much net income or net loss is the new project expected to contribute?
Paints Division of PorEleben, Inc. had the following operation result in 2019: Sales: P12,000,000 Profit Margin: 20% Assets P15,000,000 The Division is considering a P2,000,000 investment in a new project. The estimated ROI for all its operations would be 30% with the new investment. The weighted average cost of capital is 15% 1. How much net income or net loss is the new project expected to contribute?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Paints Division of PorEleben, Inc. had the following operation result in 2019:
Sales: P12,000,000
Profit Margin: 20%
Assets P15,000,000
The Division is considering a P2,000,000 investment in a new project. The estimated
its operations would be 30% with the new investment. The weighted average cost of capital is 15%
1. How much net income or net loss is the new project expected to contribute?
2. If the manager of the division is evaluated on ROI alone, will she invest on the new project?Why?
3. What would be the residual income for all its operations?
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