Question

Strong Welding Equipment Company produces and sells welding equipment nationally and internationally. Following is information about two divisions.


REQUIRED
A. Calculate each division’s ROI.
B. Calculate each division’s residual income.
C. Calculate each division’s EVA.
D. Suppose the Brazilian division had an opportunity to invest $3,500,000 in a project that would generate sales of $5,000,000 and return on sales of 10%, or $500,000. Would the division manager be likely to undertake this project if he or she is evaluated using ROI? Explain.
E. Recommend a performance evaluation measure that would increase the managers’ incentives to make decisions that would be in the best interests of theowners.


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  • CreatedJanuary 26, 2015
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