P 9. The financial results for the past two years for ABB Company, follow.

Required 1. Compute the company’s profit margin, asset turnover, and return on investment for this year and last year. Beginning total assets for last year were $160,000. Round to two decimal places.

2. The desired return on investment for the company has been set at 10 percent. Compute ABB’s residual income for this year and last year.
3. The cost of capital for the company is 5 percent. Compute the company’s economic value added for this year and last year.
4. Before drawing conclusions about this company’s performance, what additional information would you want?
Return on Investment and Economic Value Added

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ABB Company Balance Sheet December 31 This Year Last Year Assets Cash Accounts receivable Inventory Other current assets Plant assets $ 9,000 40,000 30,000 $ 4,000 50,000 25,000 1,000 1,000 120,000 100,000 Total assets $200,000 $180,000 Liabilities and Stockholders' Equity Current liabilities $ 10,000 $ 10,000 Long-term Liabilities 20,000 Stockholders' equity 170,000 Total liabilities and stockholders' equity $200,000 10,000 160,000 $180,000