The Clarity Division of Mega Glass PLC has an investment of 1,500,000 and currently generates a net

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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.
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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