It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had $51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25% Sales COGS Gross margin Operating expenses Operating income Operating assets Total assets Current liabilities East $910,000 380,000 $530,000 490,000 $40,000 West $1,100,000 660,000 $440,000 400,000 $40,000 $800,000 $500,000 $1,100,000 $830,000 $150,000 $45,000
It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had $51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25% Sales COGS Gross margin Operating expenses Operating income Operating assets Total assets Current liabilities East $910,000 380,000 $530,000 490,000 $40,000 West $1,100,000 660,000 $440,000 400,000 $40,000 $800,000 $500,000 $1,100,000 $830,000 $150,000 $45,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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sanjay
Transcribed Image Text:Calculate the current ROI, RI, and EVA for each division through the third quarter. For ROI purposes, operating assets are
considered investments. (Enter ROI as a decimal, not as a percentage. Round ROI to 4 decimal places, e.g. 0.1526. Enter negative
amounts with either a-sign e.g. -15,000 or in parenthesis e.g. (15,000).)
ROI
RI
EVA
LA
LA
East
5
0
-72000
$
LA
West
8
20000
-35000
Transcribed Image Text:It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had
$51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment.
She has gathered the following condensed income statements and selected information from the balance sheet for each division. The
company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25%
Sales
COGS
Gross margin
Operating expenses
Operating income
Operating assets
Total assets
Current liabilities
East
$910,000
380,000
$530,000
490,000
$40,000
$800,000
$1,100,000
$150,000
West
$1,100,000
660,000
$440,000
400,000
$40,000
$500,000
$830,000
$45,000
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