Veola Company has 3 factories in Avignon, Lyon, and Paris with the following results for 2021: Avignon
Question:
Veola Company has 3 factories in Avignon, Lyon, and Paris with the following results for 2021:
Avignon | Lyon | Paris | |
Revenues | 720,000 Euros | 960,000 Euros | 5,040,000 Euros |
Expenses | 300,000 Euros | 180,000 Euros | 1,920,000 Euros |
Investment Base (Gross Assets) | 1,440,000 Euros | 1,920,000 Euros | 13,200,000 Euros |
a. If the factories are treated as profit centers, which factory manager appears to have done the best job? Show your computations.
b. If the factories are treated as investment centers, which factory manager appears to have done the best job? (Assume the factory managers are evaluated by return on investment.) Show your computations.
c. If the factories are assessed based on Residual Income, which factory manager appears to have done the best job? You can assume that the corporate-wide cost of capital is 10%. Show your computations.
Expert Answer:
Answer a The manager of the factory whose profit is more compared to the profit of other factories h... View the full answer
