Quick-Silver Concrete Company is planning to release a new concrete product and it is anticipated to generate $6.8 million in estimated revenue. However, the estimated investment of 6.8 million will cost the organization $6 million in estimated expenses in the first year. Quick-Silver Concrete has allocated $5 million in capital for the product in year one and expected to earn $150,000 in income on the capital.
Q-Calculate the return on capital for this new product.
Use the formulas
1. ROC= Revenue-Expense/capital
2. ROC= Revenue-Expense+Income from Capital/Capital charge
3. RAROC= Revenue-Expense-Expected loss+Income from capital/economic capital