Suppose a small division of Safaricom has assets of KSh2,000,000, invested capital of KSh1,800,000 and net operating

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Suppose a small division of Safaricom has assets of KSh2,000,000, invested capital of KSh1,800,000 and net operating income of KSh600,000. Ignore taxes.

1. What is the division’s ROI?

2. If the weighted-average cost of capital is 14 per cent, what is the EVA?

3. Suppose management uses ROI as a performance metric. What effects on management behaviour do you expect?

4. Suppose management uses economic profit as a performance metric. What effects on management behaviour do you expect?

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Introduction To Management Accounting

ISBN: 9780273737551

1st Edition

Authors: Alnoor Bhimani, Charles T. Horngren, Gary L. Sundem, William O. Stratton, Jeff Schatzberg

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Question Posted: Dec 30, 2023 05:45 AM

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Suppose a small division of Safaricom has assets of KSh2,000,000, invested capital of KSh1,800,000 and net operating

Question:

Step by Step Answer:

1 ROI KSh600000 KSh1800000 33 2 EVA KSh600000 14KSh1800000 KSh600000 KSh252000 ...View the full answer

Introduction To Management Accounting

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