It is the end of the third quarter, and Kimberly is evaluating the performance of two...
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It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had $51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25% East West Sales COGS $910,000 $1,100,000 380,000 660,000 Gross margin $530,000 $440,000 Operating expenses 490,000 400,000 Operating income $40,000 $40,000 Operating assets $800,000 $500,000 Total assets $1,100,000 $830,000 Current liabilities $150,000 $45,000 Calculate the current ROI, RI, and EVA for each division through the third quarter. For ROI purposes, operating assets are considered investments. (Enter ROI as a decimal, not as a percentage. Round ROI to 4 decimal places, e.g. 0.1526. Enter negative amounts with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) ROI RI EVA +A +A East 5 $ -72000 +A +A West 8 20000 -35000 It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had $51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25% East West Sales COGS $910,000 $1,100,000 380,000 660,000 Gross margin $530,000 $440,000 Operating expenses 490,000 400,000 Operating income $40,000 $40,000 Operating assets $800,000 $500,000 Total assets $1,100,000 $830,000 Current liabilities $150,000 $45,000 Calculate the current ROI, RI, and EVA for each division through the third quarter. For ROI purposes, operating assets are considered investments. (Enter ROI as a decimal, not as a percentage. Round ROI to 4 decimal places, e.g. 0.1526. Enter negative amounts with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) ROI RI EVA +A +A East 5 $ -72000 +A +A West 8 20000 -35000
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