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