It is the end of the third quarter, and Sarah is evaluating the performance of two...
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It is the end of the third quarter, and Sarah is evaluating the performance of two key divisions in the company. Both divisions had $54,000 cash available for investment in the fourth quarter, so Sarah 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% Sales COGS Gross margin Operating expenses Operating income Operating assets Total assets Current liabilities East $860,000 400,000 $460,000 424,000 $36,000 $800,000 $1,200,000 $160,000 West $1,300,000 670,000 $630,000 594,000 $36,000 $500,000 $870,000 $48,000 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 $ $ LA East $ $ West It is the end of the third quarter, and Sarah is evaluating the performance of two key divisions in the company. Both divisions had $54,000 cash available for investment in the fourth quarter, so Sarah 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% Sales COGS Gross margin Operating expenses Operating income Operating assets Total assets Current liabilities East $860,000 400,000 $460,000 424,000 $36,000 $800,000 $1,200,000 $160,000 West $1,300,000 670,000 $630,000 594,000 $36,000 $500,000 $870,000 $48,000 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 $ $ LA East $ $ West
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To assess the performance of the East and West divisions lets calculate the Return on Investment ROI ... View the full answer
Related Book For
Accounting Principles
ISBN: 978-1119048503
7th Canadian Edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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