P 10. Micanopy Company makes replicas of Indian artifacts. The balance sheet for the Arrowhead Division showed that the company had invested assets of

$300,000 at the beginning of the year and $500,000 at the end of the year. During the year, Arrowhead Division’s operating income was $80,000 on sales of

$1,200,000.

Required 1. Compute Arrowhead Division’s residual income if the desired ROI is 20 percent.

2. Compute the following performance measures for the division:

(a) profit margin,

(b) asset turnover, and

(c) return on investment.

3. Compute Micanopy Company’s economic value added if total corporate assets are $6,000,000, current liabilities are $800,000, after-tax operating income is $750,000, and the cost of capital is 12 percent.