Data

Revenue $22,500

Variable Cost $8,000

Overheads and Other Cost $9,300

Profit $5,200

Investment

Beginning Balance $48,600

Ending Balance $45,800

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The other costs include estimated restructuring cost of $1.2 million that are expensed off in the year. The benefits of the restructuring are expected to be over in 3 years. The restructuring decisions were made by the individual manager.

The budgeted fixed head office costs were allocated based on the 10% of the total revenue and are include in the other costs.

The WACC is 8%.

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The manager is considering the acquisition of new equipment to be added at the beginning of the year.

Additional investments of $5 million for the equipment in the Division is estimated to bring in a net cash flow of $1.45 million.

The estimated useful life of the equipment is 5 years, with no residual value.

The accounting depreciation represents a reasonable approximation to economic depreciation.

QN: Calculate the EVA & ROI using controllable profit.