Saints, Inc., has the following data available for two of its divisions for last year: The tax

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Saints, Inc., has the following data available for two of its divisions for last year:


Saints, Inc., has the following data available for two of


The tax rate for Saints, Inc., is 30 percent.
a. Compute the following for each division:
(1) Sales margin
(2) ROI
(3) EVA
b. Briefly discuss which division appears most successful and why.
c. Assume a prospective project for Division A has operating income of $10,000, average operating assets of $60,000, average current liabilities of $4,000, and has a positive net present value. Assume the manager of Division A is evaluated based on ROI for merit pay and promotion. Would that manager want to go ahead with this prospective project?
Would your answer change if the manager were evaluated based on EVA? If so, how and why would your answerchange?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
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Managerial Accounting An Introduction to Concepts Methods and Uses

ISBN: 978-0324639766

10th Edition

Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil

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