1
Concept introduction:
The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment.
To compute:
The margin, turnover and return on investment for each division.
2
Concept introduction:
Return on investment:
The Return on Investment is also called ROI. The return means the profit you make as a result of your investments. Return on Investment is a performance measure used to evaluate the profitability or efficiency of an investments or compare the efficiency of a number of investments. ROI is generally defined as the ratio of net profit over the total cost of the investment. ROI is calculated by dividing the net income by the total cost of the investment.
Which divisional manager seems to be doing the better job? Why?
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Chapter 11 Solutions
CONNECT ONLINE ACCESS CODE MGRL ACCTG 21
- REQUIRED Study the information given below and answer the following questions. Where discount factors are required use only the four decimals present value tables that appear after the formula sheet or in the module guide. Ignore taxes. 5.1 Calculate the Accounting Rate of Return on average investment of the second alternative (expressed to two decimal places). 5.2 Determine which of the two investment opportunities the company should choose by calculating the Net Present Value of each alternative. Your answer must include the calculation of the present values and NPV. 5.3 Calculate the Internal Rate of Return of the first alterative (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. INFORMATION The management of Bentall Incorporated is considering two investment opportunities: (5 marks) (9 marks) (6 marks) The first alternative involves the purchase of a new machine for R900 000 which…arrow_forwardREQUIRED Use the information provided below to answer the following questions: 4.1 Calculate the weighted average cost of capital (expressed to two decimal places). Your answer must include the calculations of the cost of equity, preference shares and the loan. 4.2 Calculate the cost of equity using the Capital Asset Pricing Model (expressed to two decimal places). (16 marks) (4 marks) INFORMATION Cadmore Limited intends raising finance for a proposed new project. The financial manager has provided the following information to determine the present cost of capital to the company: The capital structure consists of the following: ■3 million ordinary shares issued at R1.50 each but currently trading at R2 each. 1 200 000 12%, R2 preference shares with a market value of R2.50 per share. R1 000 000 18% Bank loan, due in March 2027. Additional information The company's beta coefficient is 1.3. The risk-free rate is 8%. The return on the market is 18%. The Gordon Growth Model is used to…arrow_forwardA dog training business began on December 1. The following transactions occurred during its first month. Use the drop-downs to select the accounts properly included on the income statement for the post-closing balancesarrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
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