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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.
    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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    Solution Preview

    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 Summary

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