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A division of a company has capital employed of $2m and its return on capital is 12%. It is
considering a new project requiring capital of $500,000 and is expected to yield profits of
$90,000 per annum. The company’s interest rate is 10%.
If the new project is accepted, what will the residual income of the division be?
A $40,000
B $80,000
C $30,000
D $330,000hi sir can you please explain how to solve this becaus i dont understand it at all
You can find a detailed explanation of how to solve this by watching my free lectures working through Chapter 30 of our free lecture notes.
The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
(And why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers. It has answers and explanations.)
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