Question: please help me with question2 all the questions and section B all the questions. thank you! b. residual income method 15 marks] Question2 Axis company
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b. residual income method 15 marks] Question2 Axis company is a very small company in terms of market capitalisation. The information about this company is given below: Total assets-$250000 Debt utilized-40% of total assets Canada bond rate =390 TSX index at Jan 2016-14567 TSX index at December 2016 16238 Beta -1.9 Cost of debt-8% Tax rate " 35% Earning before interest and tax -$45000 Research & development- $55000 Training cost on workers- $25000 Vehicles for personal service $35000 Investment in the shares of other company $20000 a) Calculate the capital employed b) Calculate the equity charge c) Calculate operating assets d) Calculate residual value e) Calculate the economic value added [EVA] D Why are EVA and residual income a better measure of profitability of a company than net income and what do they indicate to a management accountant? 125 marks ) SECTION B QUESTION 1 Jane Doe is a private company which a management accountant is analyzing its performance. So it is trying to look at different components that are distributing to its success. The tests he wants to carry out are based on the following information using the table below: ITEMS Cash Account receivable Land bought for speculation Current Liabilities 4500 15600 70000 25000 15000 320000 29800 23000 25% 9500 56200 13% 25% Personal car PPE for the business EBITDA Operating profit Tax rate Net income Sales Cost of equity Debt REQUIRED I. Calculate the operating assets of the company. 2. Calculate residual income 3. Calculate the Net operating income. 4. What are the profit margin and the asset turnover of the company? 5. Using Du Pont analysis calculate the ROI of the company 6. What are the major criticisms directed towards the use of Return on Investment. [Mark 30]
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