Zooms, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year: Management has a 26% target rate of return for each division. Zooms weighted average cost of capital is 13% and its effective tax rate is 27%. Requirements 1. Calculate each divisions

Chapter 24, Short Exercises #17

Zooms, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:

Average Total Assets Current Liabilities Operating Income Sales $ 520,000 $ 1,020,000 192,000 S 392,000 62,000 143,000 6

Management has a 26% target rate of return for each division. Zooms€™ weighted average cost of capital is 13% and its effective tax rate is 27%.
Requirements
1. Calculate each division€™s ROI. Round all of your answers to four decimal places.
2. Calculate each division€™s profit margin. Interpret your results.
3. Calculate each division€™s asset turnover. Interpret your results.
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can youconclude?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...