Question: Performance Evaluation and Decentralization Assignment For this assignment, you will be calculating return on investment, margin, turnover, residual income, and economic value added ratios for
Performance Evaluation and Decentralization Assignment
For this assignment, you will be calculating return on investment, margin, turnover, residual income, and economic value added ratios for two divisions of the same company.
Directions: Complete the following calculations in an Excel file. Be sure to show and label your work for full credit.
A company has two divisions with the following information:
| Sales: | 2,000,000 |
| Operating Income: | 400,000 |
| Assets Jan. 1: | 4,000,000 |
| Assets Dec. 31: | 4,500,000 |
| Sales: | 1,000,000 |
| Operating Income: | 300,000 |
| Assets Jan. 1: | 2,000,000 |
| Assets Dec. 31: | 2,200,000 |
The Minimum required rate of return for the company for all of its divisions is 30% and its cost of capital is 15%. The company has an income tax rate of 40%. Calculate the following ratios for both divisions:
Return on Investment
Margin
Turnover
Residual income
Economic Value Added
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