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

Formula to compute the EVA :EVA = After-tax operating income - (WACC x Invested Capital).

Answered: The weighted-average cost of capital of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Campbell Technologies, Inc. has three divisions. Campbell has a desired rate of return of 13.0 percent. The operating assets and income for each division are as follows: Operating Operating Divisions Assets Income 580,000 850,000 400,000 $ 99,760 98,600 58,000 Printer $ Сopier Fax Total $1,830,000 $256,360 Campbell headquarters has $124,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROls: Expected ROIS for Additional Investments Divisions Printer 14.5% Copier 13.5% Fax 12.5% Required a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROI? b. Based on ROI, which division manager would be most eager to accept the $124,000 of investment funds? c. Based on ROI, which division manager would be least likely to accept the $124,000 of investment funds? d. Which division offers the best investment opportunity for Campbell? g.…
Campbell Technologies, Inc. has three divisions. Campbell has a desired rate of return of 13.0 percent. The operating assets and income for each division are as follows: THI Operating Operating Divisions Assets Income $ 99,760 98,600 58,000 Printer $ 580,000 850,000 400,000 Copier Fax Total $1,830,000 $256,360 Campbell headquarters has $124,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROls: Expected ROIS for Additional Investments Divisions Printer 14.5% Copier 13.5% Fax 12.5% Required a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROI? b. Based on ROI, which division manager would be most eager to accept the $124,000 of investment funds? c. Based on ROI, which division manager would be least likely to accept the $124,000 of investment funds? d. Which division offers the best investment opportunity for Campbell?…
Blossom Industries operates as an investment center. Buddy Hall, the region's division manager, has set a required minimum rate of return of 15%. Blossom's total assets are $362,000, current liabilities are $162,000, and operating income is $72,000. The company's weighted-average cost of capital is 18% and its tax rate is 28%. Blossom's EVA $
a-2. which division had the better performance? east or west
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106. Subject :- Finance
Required: The following data pertain to three divisions of Nevada Aggregates, Inc. The company's required rate of return on invested capital is 6 percent. (Round "Capital turnover" answers to 2 decimal places.) Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Division A $ $ $ $ 9,500,000 1,710,000 $ 9,500,000 $ 18 % 1.00 18 % $ 1,140,000 $ Division B 40,800,000 8,160,000 10,200,000 20 % 4.00 80 % 7,548,000 Division C 20 % 0.90 18 % 501,000
Mason Corporation had $1,098,000 in invested assets, sales of $1,257,000, operating income amounting to $246,000, and a desired minimum return on investment of 15%. The residual income for Mason Corporation is a.$113,820 b.($6,000) c.$0 d.$81,300
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Blaser Corporation had $1,098,000 in invested assets, sales of $1,243,000, operating income amounting to $237,000 , and a desired minimum return on investment of 14%. The return on investment for Blaser Corporation is
A-1. Evaluate the performance of the two divisions assuming BMI uses economic value added (EVA). A-2. Which division had the better performance?
Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets Wescott is considering an expansion project in the upcoming year that will cost $5.7 million and return $521,000 per year. The project would be implemented by only one of the three divisions. Complete this question by entering your answers in the tabs below. Req 1 Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if…

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