Hi,
I am a little unclear with question 11 on pilot paper F2 Dec 2011.
The question is:
A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36000.
What is the company's return on investment?
Answer is (A) which in this answer gain is added to cost, and the formula as I understand subtracts the cost. So I am little confused as to why this is added?
I am a little unclear with question 11 on pilot paper F2 Dec 2011.
The question is:
A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36000.
What is the company's return on investment?
Answer is (A) which in this answer gain is added to cost, and the formula as I understand subtracts the cost. So I am little confused as to why this is added?
