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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Performance measurement

- This topic has 1 reply, 2 voices, and was last updated 10 months ago by John Moffat.

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- March 14, 2022 at 12:04 pm #651260
Hello sir,

Can you help me with couple of questions

1) A Co has a capital employed of $200000.It has a cost of capital of 12% per year .It’s residual income is $36000.What is the company’s ROI ??

Answer is 30%.

A division earns a residual income of $200000.The imputed interest charge is $150000 and it’s cost of capital is 20% per annum .What is the divisions ROCE?

Answer is 46.7%

I don’t get the answer for both can you please show it’s steps .

TIA ?

March 14, 2022 at 3:52 pm #6512731. The residual income = profit – (12% x 200,000) = 36,000. Therefore the profit = 60,000

Therefore the ROI = 60,000/200,000 = 30%2. The residual income = profit – 150,000 = 200,000. Therefore the profit = 350,000.

The capital employed = 150,000/20% = 750,000

Therefore the ROCE = 350,000/750,000 = 46.7%

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