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What was its return on investment

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Question 1 - The Brightwater Division of Richmond Ltd requires a 12% rate of return. During a recent year Brightwater had a net profit of $400,000 and a residual income of $250,000. What was its return on investment (ROI)?

a. 26%

b. 15%

c. 32%

d. 12%

e. None of these

Question 2 - Here are some of the annual results for Remuera Division of Auckland Corporation:

Sales Revenue $840,000

Variable Costs $310,000

Fixed Costs $360,000

Average operating assets $900,000

Current Liabilities $300,000

Long-term Liabilities $1,000,000

Company Tax Rate 28%

Weighted Average Cost of Capital (WACC) 8%

Required return 10%

What is Remuera's Residual Income (RI)?

a. $40,000

b. $80,000

c. none of these

d. $32,400

e. $98,000

Reference no: EM132561907

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