Business unit A has a return on investment of 10%, with a net profit for the year of $40,000. The opportunity cost for the business unit investments has been calculated at 8%. The company plans to purchase a new machine worth $100,000 and expects the net profit to rise by an additional $15,000. The new purchase decision will increase the return on investment
a. by 1% and increase the residual income by $8,000.
b. by 1% and increase the residual income by $15,000.
c. to 11% and increase the residual income by $7,000.
d. to 11% and increase the residual income by $15,000.
The correct answer is C !! Is there any colleague can explain the answer to me??
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Ali Mansour
Accountant
hayco Travel
Giza
Egypt
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