As the CEO of Middling Hardware Company, you examined the following measures of the performance of three divisions (in thousands of dollars):

1. Calculate for each division the rate of return on net assets and the economic profit based on historical cost and on replacement cost. For purposes of calculating economic profit, use 10% as the cost of capital.
2. Rank the performance of each division under each of the four different measures computed in number 1.
3. What do these measures indicate about the performance of the divisions? Of the division managers? Which measure do you prefer?Why?

  • CreatedNovember 19, 2014
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