Question 10.1 Sleepy Owl Company allows its divisions to operate as autonomous units. Their results for the current year were as follows: Pillow Blanket Bed Sheet Revenues $2,250,000 $500,000 $4,800,000 Current assets 800,000 152,500 1,435,000 Capital assets 1,000,000 400,000 1,750,000 Current liabilities 350,000 75,000 540,000 Net operating income 220,000 60,000 480,000 After-tax income 143,000 39,000 312,000 Weighted average cost of capital 8.5% 8.5% 8.5% Required: Return on sales Return on investment based on total assets employed Economic value added Residual income based on net operating income
Question 10.1 Sleepy Owl Company allows its divisions to operate as autonomous units. Their results for the current year were as follows: Pillow Blanket Bed Sheet Revenues $2,250,000 $500,000 $4,800,000 Current assets 800,000 152,500 1,435,000 Capital assets 1,000,000 400,000 1,750,000 Current liabilities 350,000 75,000 540,000 Net operating income 220,000 60,000 480,000 After-tax income 143,000 39,000 312,000 Weighted average cost of capital 8.5% 8.5% 8.5% Required: Return on sales Return on investment based on total assets employed Economic value added Residual income based on net operating income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 10.1
Sleepy Owl Company allows its divisions to operate as autonomous units. Their results for the current year were as follows:
|
|
Pillow |
Blanket |
Bed Sheet |
|
Revenues |
$2,250,000 |
$500,000 |
$4,800,000 |
|
Current assets |
800,000 |
152,500 |
1,435,000 |
|
Capital assets |
1,000,000 |
400,000 |
1,750,000 |
|
Current liabilities |
350,000 |
75,000 |
540,000 |
|
Net operating income |
220,000 |
60,000 |
480,000 |
|
After-tax income |
143,000 |
39,000 |
312,000 |
|
Weighted average cost of capital |
8.5% |
8.5% |
8.5% |
Required:
- Return on sales
Return on investment based on total assets employed- Economic value added
- Residual income based on net operating income
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