Question: Question 2 Valley Ltd provides the following data: Net operating profit $1,800,000 Total assets $6,460,000 The company's required rate of return is 15%. Required: a)Calculate

Question 2

Valley Ltd provides the following data:

Net operating profit

$1,800,000

Total assets

$6,460,000

The company's required rate of return is 15%.

Required:

a)Calculate return on investment

b)Calculate residual income

c)The manager is looking into a potential new line of business requiring and investment of $1,700,000 which is likely to realise a profit of $300,000. What decision would the manager reach if performance is measured under:

i.ROI

ii.RI

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