This question appeared in the June 2015 exam.?
A division is considering investing in capital equipment costing $2.7m. The useful economic life of?the equipment is expected to be 50 years, with no resale value at the end of the period. The?forecast return on the initial investment is 15% per annum before depreciation. The division's cost?of capital is 7%??
What is the expected annual residual income of the initial investment??