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Blossom Corporation recently announced a bonus plan to reward the manager of its most profitable division. The three divisional managers are to decide which performance
Blossom Corporation recently announced a bonus plan to reward the manager of its most profitable division. The three divisional managers are to decide which performance measure will be used to evaluate profitability. Blossom Corporation requires a 10% minimum return on investment. The following information is available for the year just ended. Division Ashton Drye Poole Gross Divisional Book Value Operating of Assets Income $800,000 $94,780 756,500 91,020 455,000 58,090 (a) Calculate return on investment. (Round ROI to 2 decimal places, e.g. 5.12%.) Return on Investment Ashton Drye Poole Which division performed the best? (b) Calculate residual income. (If the amount is negative then enter with a negative sign preceding the number, e.g. -5,125 or parentheses, e.g. (5,125).) Residual Income Ashton $ Drye $ Poole Which division performed the best? (c) Assume that Blossom Corporation's weighted average cost of capital is 6% and its tax rate is 20%. Calculate economic value added. (If the amount is negative then enter with a negative sign preceding the number, e.g. -5,125 or parentheses, e.g. (5,125).) Economic Value Added Ashton A Drye A Poole A Which division performed the best
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