C 4. Sevilla Consulting offers environmental consulting services worldwide. The managers of branch offices are rewarded for superior performance with bonuses based on the economic value that the office adds to the company. Last year’s operating results for the entire company and for its three offices, expressed in millions of U.S. dollars, are as follows:

1. Compute the economic value added for each office worldwide. What factors affect each office’s economic value added? How can an office improve its economic value added?
2. If managers’ bonuses are based on economic value added to office performance, what specific actions will managers be motivated to take?
3. Is economic value added the only performance measure needed to evaluate investment centers adequately? Explain your response.
Return on Investment and Residual Income

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Worldwide Europe Americas Asia Cost of capital 9% 10% 8% 12% Total assets $210 $70 $70 $70 Current liabilities $80 $10 $40 $30 After-tax operating income $15 $5 $5 $5