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2 4 - 3 2 . ROI, RI , EVA, AND PERFORMANCE EVALUATION. Isla Manufacturing makes fashion products and competes on the basis of quality
ROI, RI EVA, AND PERFORMANCE EVALUATION. Isla
Manufacturing makes fashion products and competes on the basis of quality and leadingedge designs. The company has two divisions, clothing and cosmetics Isla has $ invested in assets in its clothing division. Aftertax operating income from sales of clothing this year is $ The cosmetics division has $ invested in assets and an aftertax operating income this year of $ The weightedaverage cost of capital for Isla is The CEO of Isla has told the manager of each division that the division that "performs best" this year will get a bonus.
Required
Calculate the ROI and residual income for each division of Isla Manufacturing, and briefly explain which manager will get the bonus. What are the advantages and disadvantages of each measure?
The CEO of Isla Manufacturing has recently heard of another measure similar to residual income called EVA. The CEO has the accountant calculate adjusted incomes for clothing and cosmetics and finds that the adjusted aftertax operating incomes are $ and $ respectively. Also, the clothing division has $ of current liabilities, while the cosmetics division has only $ of current liabilities. Using the preceding information, calculate the EVA
Required
Calculate the ROI and residual income for each division of Isla Manufacturing, and briefly explain which manager will get the bonus. What are the advantages and disadvantages of each measure?
The CEO of Isla Manufacturing has recently heard of another measure similar to residual income called EVA. The CEO has the accountant calculate adjusted incomes for clothing and cosmetics and finds that the adjusted aftertax operating incomes are $ and $ respectively. Also, the clothing division has $ of current liabilities, while the cosmetics division has only $ of current liabilities. Using the preceding information, calculate the EVA for each division and discuss which manager will get the bonus.
What nonfinancial measures could Isla use to evaluate divisional performances?
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