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3 year evaluation

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Cost of capital is 10% Net investment is calculated as total assets less than all liabilities. Critically evaluate performance for 2009 to 2011.
($000,000)
2009 2010 2011
Net income $14.0 $14.3 $14.4
Total assets 125 130 135
Return on net
investment 20% 22% 24%

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A three year evaluation is discussed very comprehensively in this explanation.

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The cost of capital is 10% however; the cost of capital should not be calculated on net investment but on total assets deployed.

If we take net income for the year 2009, it is $14.0 that is 11.2 % of the total assets that is 125.
If we take net income for the ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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