The following data are available for two divisions of Solomons Company: The cost of capital for the

Question:

The following data are available for two divisions of Solomons Company:

The cost of capital for the company is 10 percent. Ignore taxes.
Required
a. If Solomons measures performance using ROI, which division had the better performance?
b. If Solomons measures performance using economic value added, which division had the better performance? (The divisions have no current liabilities.)
c. Would your evaluation change if the company€™s cost of capital were 20percent?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...