a) Compute both Economic Value-Added (EVA) and Return on Capital (ROC) statistics for each of the Divisions. Take care to show workings and to lay-out calculations in a clear format. AND b) Examine the relative merits and limitations of Economic Value-Added (EVA) and Return-on-Capital (ROC) measures, explaining how they could best be used to assess managerial performance internally and to report performance to canital markets
a) Compute both Economic Value-Added (EVA) and Return on Capital (ROC) statistics for each of the Divisions. Take care to show workings and to lay-out calculations in a clear format. AND b) Examine the relative merits and limitations of Economic Value-Added (EVA) and Return-on-Capital (ROC) measures, explaining how they could best be used to assess managerial performance internally and to report performance to canital markets
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
- I've found out the EVA for each one as you can see but don't know how to calculate ROC. I think it's operating income/capital charge. Anyways I wanted to ask how I would solve part B which is telling me to examine. Can you tell me what you would do for B
Transcribed Image Text:а)
Compute both Economic Value-Added (EVA) and Return on Capital (ROC)
statistics for each of the Divisions. Take care to show workings and to lay-out
calculations in a clear format.
AND
b)
Examine the relative merits and limitations of Economic Value-Added (EVA)
and Return-on-Capital (ROC) measures, explaining how they could best be
used to assess managerial performance internally and to report performance to
capital markets.
Transcribed Image Text:Réčéntly Financial Logical
Text
Date & Lookup & Maths &
Time
a Trace
ion
Used
More
O Create from Selection
Reference
Trig
Functions
A Remo
xV fx
C
F
G.
H.
K.
Calculation of Economic Value Added
£ Thousand
Generation Distribution New Energy
Operating Income
Add: Interest on Debt
29,006
14,156
1,026
90
60
40
Add: Once-off write down in value of investments
1500
0.
Add: Exceptional cost of fire
Equal: Adjusted profit for year
Less: Capital Charge (10%)
EVA for financial year
800
30,596
14,216
1,866
8095
2115
1347
22,501
12,101
519
Capital Charge Calculation
Shareholder Capital Invested
Add: Debt Capital (Both Long and Short-term)
79,350
20,150
12,850
1600
1000
620
Total
80,950
21,150
13,470
10% Capital Charge
8095
2115
1347
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