The following data are available for two divisions of Ryan Enterprises: The cost of capital for the

Question:

The following data are available for two divisions of Ryan Enterprises:

The cost of capital for the company is 7 percent. Ignore taxes.

Required

a. If Ryan measures performance using ROI, which division had the better performance?

b. If Ryan 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 was 10 percent? Why?

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Fundamentals Of Cost Accounting

ISBN: 9781264100842

7th Edition

Authors: William Lanen

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Question Posted: Aug 26, 2022 12:25 AM

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The following data are available for two divisions of Ryan Enterprises: The cost of capital for the

Question:

Division operating profit. Division investment... Alpha Division $ 7,200,000 32,000,000 Beta Division $1,080,000 3,000,000

Step by Step Answer:

a b Using EVA c Using ROI the comparison is not affected by the cost of ...View the full answer

Fundamentals Of Cost Accounting

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