Could someone please assist me with the above topic I'm having problems in calculating questions. However here is one of them:
A company has capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36,000.
What is the company's return on investment?
12y ago#1The residual income is calculated after subtracting interest at 12% on the capital employed of 200,000 ie 24000. That means that the profit must be 24000 + 36000 =
60000.
The return on capital employed is the profit as a percentage of the capital employed , so now it is easy :-)
Thanks for your response how ever how do I calculate the or how to get it into a percentage?
12y ago#3You divide the profit by the capital employed and multiply by 100.
Thanks for the response. However just to be sure I got it please correct me if I'm wrong with the calculations 60,000/24000*100?
12y ago#5No! The capital employed is 200,000, so it is (60,000/200,000)*100
Which is 30%
Thanks again OMG I'm really horrible I don't think there's anyway I would be successful for my exams as it's two I'm doing and look at how badly of I am. I'm also horrible @ FFA I'm soo ashamed.
12y ago#7Just keep studying :-)
Okay thanks for the advice will try. Your feed back has been greatly appreciated.
12y ago#9You are welcome :-)
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