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A division has a residual income of $240,000 and a net profit before
imputed interest of $640,000.
If it uses a rate of 10% for computing imputed interest on its
invested capital, what is its return on investment (ROI) to the
nearest whole number?
A 4%
B 10%
C 16%
D 27%hi can you please help me solve this
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers. It has answers and explanations.
The notional interest must be 640,000 – 240,000 = 400,000.
Since it is calculated using a rate of 10%, the investment must be 400,000/10% = 4,000,000
Therefore the ROI is 640,000/4,000,000 = 16%.
Have you not watched my free lectures on this? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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