Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions: soap products,

Question:

Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions: soap products, skin lotions, and hair products. Information about the most recent year's operations follows. The information includes the value of intangible assets, including research & development, patents, and other innovations that are not included on HSC's balance sheet. Were these intangibles to be included in the financial statements, the increase in the balance sheet and the increase in after-tax net income are shown below:

Problem Information

Division ___________________________Operating Income

Soap Products ....................................... 3250000

Skin Lotions ........................................... 2750000

Hair Products .......................................... 5000000

Minimum desired rate of return Cost of capital

Requirements:

1. Calculate the ROI for each division.

2. Calculate the residual income for each division.

3. Calculate EVA® for each of the divisions and comment on your answers for ROI, RI, and EVA®.

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...