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Sunlux Group is a divsionalised company that has divisions in other countries but headquartered in Namibia. Due to the divisionalised nature of Sunlux, performance measurement is of crucial importance to determine the progress each division is making and to reward those divisions who are performing exceptionally well. Sunlux currently uses return on investment (ROI) and residual income (RI) to assess the performance of the divisions. The following financial records have been extracted for the Malawian Division. The Malawian Division reports in Namibian dollars. Year ending 31 August Revenue Direct expenses Gross profit Other operational expenses Operating profit Capital employed (close of year) 2022 N$000 6450 (1 070) 5 380 (3 350) 2 030 3 200 Revenue per year Cost per year (exclusive if depreciation) Life span 2021 N$000 6 200 (1 040) 5160 (3 600) 1560 4 000 2020 N$000 6 000 (1 000) 5 000 (3 800) 1200 5.000 Sunlux uses a cost of capital of 5% to assess divisional performance. The capital employed shown in the table above represents the carrying amounts of the division's non-current assets. Other operational expenses are inclusive of annual depreciation charge. The Malawian Division did not add or dispose non-current assets at any time in the three years. Neither additions nor disposal are anticipated in the 2023 financial period. For the current financial year (2023), revenues and expenses (excluding depreciation) will maintain the 2022 figures. New project The board of directors for Sunlux are proposing a project that would require an investment of N$2 000 000. They believe this is a lucrative project and have provided the following details: N$750 000 N$225 000 5 year Sunlux Group is a divsionalised company that has divisions in other countries but headquartered in Namibia. Due to the divisionalised nature of Sunlux, performance measurement is of crucial importance to determine the progress each division is making and to reward those divisions who are performing exceptionally well. Sunlux currently uses return on investment (ROI) and residual income (RI) to assess the performance of the divisions. The following financial records have been extracted for the Malawian Division. The Malawian Division reports in Namibian dollars. Year ending 31 August Revenue Direct expenses Gross profit Other operational expenses Operating profit Capital employed (close of year) 2022 N$000 6450 (1 070) 5 380 (3 350) 2 030 3 200 Revenue per year Cost per year (exclusive if depreciation) Life span 2021 N$000 6 200 (1 040) 5160 (3 600) 1560 4 000 2020 N$000 6 000 (1 000) 5 000 (3 800) 1200 5.000 Sunlux uses a cost of capital of 5% to assess divisional performance. The capital employed shown in the table above represents the carrying amounts of the division's non-current assets. Other operational expenses are inclusive of annual depreciation charge. The Malawian Division did not add or dispose non-current assets at any time in the three years. Neither additions nor disposal are anticipated in the 2023 financial period. For the current financial year (2023), revenues and expenses (excluding depreciation) will maintain the 2022 figures. New project The board of directors for Sunlux are proposing a project that would require an investment of N$2 000 000. They believe this is a lucrative project and have provided the following details: N$750 000 N$225 000 5 year
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11 Return on Investment ROI and Residual Income for 2022 and 2023 excluding new project ROI for 2022 ROI2022 fracOperating ProfitCapital Employed100 R... View the full answer
Related Book For
Global Marketing management
ISBN: 978-0470505748
5th edition
Authors: Masaaki Kotabe, Kristiaan Helsen
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