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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Residual income question in practice exam
Hi
In the F2 practice exam on this website there is a question on residual income which I cannot get the correct answer to using the calculation I believe is correct.. the question is ‘an investment division currently has net assets of $500,000 and is earning profits of $70,000 per annum. The divisional manager is considering a new investment which will cost $20,000 and will generate additional profits of $2,200 per annum. The company has a cost of finance of 10%. What is the RI for the division with and without the new investment?’
Using the calculation per the study books I would do for
without investment – 70,000 – (500,000*10%)= 20,000
and for the new investment 72,200 – (520,000*10%) = 20,200.
However the answer in the exam says it is 30,000 and 29,800 respectively.
Please help!
Your answer is correct.
There is a mistake in our answer which I thought had already been corrected – I will check again.
Sorry 🙁
Thanks for coming back so quickly. At least I won’t forget this calculation for the exam! 🙂
You are welcome (and that is true about not forgetting 🙂 )
