The weighted-average cost of capital of Eagle Ridge is 8 percent. Last year, one of Eagle Ridge's divisions generated an EVA of $3,200,000, while the division's assets less its current liabilities were $24,000,000. How much after-tax operating income did the division generate? After-tax operating income
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- Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows: Division 1: Sales: Expenses: Asset investment: $200,000 $150,000 $1,000,000 Division 2: Sales: $45,000 Expenses: $35,000 Asset investment: $200,000 Conner currently requires investments to meet a rate of return on asset investment of 5%. Which division has the greatest level of "residual income"? Select one: O a. Division 1 O b. Division 2 O c. Both divisions have the same return on investment ratioMacon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net income of $38 million. Included in the income was interest expense of $3,300,000. The company's tax rate was 40%. Total assets were $465 million, current liabilities were $109,000,000, and $67,000,000 of the current liabilities are noninterest bearing. What are the invested capital and ROI for Macon? Enter your answer in whole dollar. Round "ROI" answer to two decimal places.The Western Division of Claremont Company had net operating income of $148,000 and average invested assets of $558,000. Claremont has a required rate of return of 13.00 percent. Western has an opportunity to increase operating income by $40,000 with a $85,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. Note: Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Residual Income (Loss) answers to the nearest whole dollar. Return on Investment (ROI) Residual Income (Loss) Current Proposed Project %
- Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows: Sales revenue Divisional income Divisional investment Current liabilities R&D Alloys $ 7,400 777 5,550 160 200 Residual Income of Alloys division Residual Income of Petro division Which division performed better? Petro $ 5,500 945 7,000 200 300 Required: Evaluate the performance of the two divisions assuming Houghton Chemicals uses residual income. Note: Enter your answers in thousands of dollars rounded to 1 decimal place. X Answer is not complete. The Petro division performed betterPolymer Coating Enterprises has an operating income of $100,000 on revenues of $1,000,000. Average invested assets are $500,000 and the Company has an 8% cost of capital. What is the residual income?Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results: Adams Division Jefferson Division Net (after-tax) income $641,300 $378,000 Total capital employed 4,200,000 3,282,500 Washington's actual cost of capital was 12%. Required: 1. Calculate the EVA for the Adams Division. If required, enter a negative EVA as a negative number by entering your answer with the minus sign. 2. Calculate the EVA for the Jefferson Division. If required, enter a negative EVA as a negative number by entering your answer with the minus sign. 3. Conceptual Connection: Is each division creating or destroying wealth? Adams Division Jefferson Division 4. Describe generally the types of actions that Washington’s management team could take to increase Jefferson Division’s EVA? Increase the after-tax operating profit that is generated from using the same amount of invested capital. Continue…
- Cabell Products is a division of a major corporation. Last year the division had total sales of $11,650,000, net operating income of $1,141,700, and average operating assets of $3,495,000. The company's minimum required rate of return is 11%. The division's residual income is closest to: Multiple Choice $1,141,700 $1,526,150 $757,250 $(768,900)Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows: Sales revenue Divisional income. Divisional investment Current liabilities R&D Alloys $ 7,400 777 5,550 160 200 EVA of Alloys division EVA of Petro division Which division performed better? Petro $ 5,500 945 7,000 200 300 Required: Evaluate the performance of the two divisions assuming Houghton Chemicals uses economic value added (EVA). Note: Enter your answers in thousands of dollars rounded to 1 decimal place. The Petro division performed betterAssume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 30%. Its effective tax rate is 40%. Sales Operating income Total assets Current liabilities What is the division's Residual Income (RI)? OA. $100,000 O B. $4,400,000 Ⓒ C. $700,000 O D. $280,000 $11,000,000 1,100,000 4,000,000 780,000
- The Western Division of Claremont Company had net operating income of $154,000 and average invested assets of $557,000. Claremont has a required rate of return of 14.75 percent. Western has an opportunity to increase operating income by $48,000 with a $84,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. Note: Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Residual Income (Loss) answers to the nearest whole dollar. Return on Investment (ROI) Residual Income (Loss) Current % Proposed ProjectAssume division 1 of the XYZ Company had the following results last year (in thousands) Management's required rate of return is 81% and the weighted average cost of capital is 6% Its effective tax rate is 30% Sales$ 9,000,000 Operating expenses $ 1,200,000 Operating income $1,500,000 Total revenue$ 2,000,000 Total assets $ 12,000,000 Current liabilities$ 5,000,000 What is the division's residual income? $100,000 $200,000 $500, 000 $ 540,000 Assume division 1 of the XYZ Company had the following results last year (in thousands). Management's required rate of return is 8% and the weighted average cost of capital is 6% effective tax rate is 30% . \table [[Sales, $9, 000, 000Assume the hiking shoes division of the all about shoes corporation had the following results last year (in thousands). Managements target rate of return is 15% and the weighted average cost of capital is 25%, it's effective tax rate is 30%.