Question: The Clarity Division of Mega Glass PLC has an investment
The Clarity Division of Mega Glass PLC has an investment of £1,500,000 and currently generates a net profit of £112,500 per year. Clarity has proposed an additional investment of £1,000,000 which is expected to return an annual profit of £90,000. Mega Glass is concerned that Clarity is not recovering the group’s cost of capital of 8%. Use ROI and RI techniques to advise Mega Glass.
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