Venpool, Inc., manufactures and sells cooktops and ovens through three divisions:

Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands):

The income tax rate for Venpool, Inc., is 30 percent. Venpool, Inc., has two sources of financing: bonds paying 6 percent interest, which account for 30 percent of total investment, and equity accounting for the remaining 70 percent of total investment.
Venpool, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Venpool stock has an Opportunity cost of 5 percent over the 6 percent long-term government bond rate.
Venpool’s total capital employed is $3.34 million ($2,100,000 for the Home Division, $700,000 for the Restaurant Division, and the remainder for the Specialty Division).
Required:
1. Prepare a segmented income statement for Venpool, Inc., for last year.
2. Calculate Venpool’s weighted average cost of capital. (Round to four significant digits.)
3. Calculate EVA for each division and for Venpool, Inc.
4. Comment on the performance of each of the divisions.LO1

Transcribed Image Text:

Home Restaurant Specialty Sales $3,450 $3,000 $2,100 Cost of goods sold 2,400 2,200 1,400 Selling and administrative expenses 840 370 250