bollon uses residual income to appraise its division using a cost of capital of 10 611405
Bollon uses residual income to appraise its division using a cost of capital of 10%. It gives the managers of these division considerable autonomy although it retains the cash control function at head office.
The following information was available for one of the divisions:
|
Net profit after tax £’000 |
Profit before interest and tax £’000 |
Divisional net assets £’000 |
Cash/ (overdraft) £’000 |
|
|
Division 1 |
47 |
69 |
104 |
(21) |
A £36 600
B £56 500
C £58 600
D £60 700