Question: Problem #1 Below is information for Division Z: Division Z Sales 1,250,000 Operating income $75,000 Operating assets ? ROI 15% Operating income Margin ? Operating

Problem #1

Below is information for Division Z:

Division Z

Sales

1,250,000

Operating income

$75,000

Operating assets

?

ROI

15%

Operating income Margin

?

Operating assets Turnover

?

Minimum rate of return

10%

Required:

1) What is the residual income for Division Z?

2) What is the turnover for Division Z?

4.

Problem #2

The MistleToe Corporation sells Christmas decorations. They had the following financial information for 2019:

Pre-Tax Operating Profit

$6,000,000

Total Capital employed

$12,000,000

Amount of Debt

$8,000,000

MV of Equity

$4,000,000

Pre-tax cost of debt

12%

Securities premium over risk-free rate

9%

Risk-Free rate

6%

Tax rate

35%

The MistleToe Corporation has decided to implement an EVA bonus plan for its top executives.

Required: Calculate the Economic Value Added (EVA) to the corporation in 2019.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Q:

MC1. Which of the following changes would NOT change return on investment (ROI)? a. Decrease sales and expenses by the same percentage. b. Increase total assets. c. Increase sales dollars by the same...

Q:

The following information pertains to the three divisions of Merrymount Company: Division X Division Y Division Z ? ? 1,250,000 Sales $ 36,000 $25,000 $ 75,000 Net operating income 300,000 ? ?...

Q:

Gideon Corp. is a reinsurance and financial services company. Gideon strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual...

Q:

Provide the missing data in the following table for a distributor of martial arts products: (Round "Turnover" and "ROI" answers to 1 decimal place.) Alpha Charlie Division Bravo $ 315,000 $ 31,500...

Q:

QUESTION #2 Return on investment is often expressed as follows: ROI= Controllable margin = Controllable margin X Sales Average operating asset. Sales Average operating assets. Required a. What would...

Q:

Q 2 (12 marks) Gideon Corp. is a reinsurance and financial services company. Gideon strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI...

Q:

Strategic management accounting CoursHeroTranscribedText: Hamilton Ltd is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone...

Q:

Strategic management accounting Hamilton Ltd is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial...

Q:

Selected operating data on the two divisions of Cairo Company are given below: Division Eastern Western Sales $4,000,000 $2,000,000 Net operating income $500,000 ? Average operating assets $2,000,000...

Q:

Please Answer the following questions: Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning...

Q:

Why is Relational Algebra in SQL important?

Q:

Define the components of total return. Can any of these components be negative?

Q:

15. Write an instruction that moves the second byte in myWords to the AL register. Use the following data definitions .data myBytes BYTE 10h,20h,30h,40h myWords WORD 3 DUP(?),2000h myString BYTE...

Q:

5. Develop a scenario comparing two PH programs and involving the use of a CBA.

Q:

2-15 Describe the Information systems and IT infrastructure at Income after migrating to the fully digital system. NTUC Income (Income), one of Singapores largest insurers, has over 2 million policy...

Q:

2-17 How well is Income prepared for the future? Are the problems described in the case likely to be repeated? NTUC Income (Income), one of Singapores largest insurers, has over 2 million policy...

Q:

2-16 What benefits did Income reap from the new system? NTUC Income (Income), one of Singapores largest insurers, has over 2 million policy holders with total assets of S$31.3 billion. The insurer...