- This topic has 1 reply, 2 voices, and was last updated 6 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
A divisional manager is evaluated by the head office using RI and therefore uses RI to
appraise projects.
Company cost of capital = 10%
New project details: Investment $600,000
3-year life
No residual value
Annual cash inflow $500,000.Y1 Y2 Y3
Cash flow 500 500 500
Depreciation (200) (200) (200)
Profit 300 300 300
NBV 600 400 200
Imputed interest 60 40 20
Profit ? interest = residual income 240 260 280Why the NBV for Y1 is 600 but not 400?
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.