Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Check Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products.

image text in transcribed

Check Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information about the most recent year's operations follows. The information includes the value of intangible assets, including research and development, patents, and other innovations that are not included on HSC's balance sheet. Were these intangibles to be included in the financial statements (as they are for EVA), the increase in the balance sheet and the increase in after-tax operating income would be as given below: Division Soap products Skin lotions Hair products Minimum desired rate of return Cost of capital Operating Income $ 3, 242,000 2,742,000 4,992,000 5.008 4.00% Average Total Assets $ 59,992,000 32,992,000 54,992,000 Value of Intangibles $ 1,492,000 7,992,000 992,000 Intangibles' Effect on Income $ 992,000 5,992,000 692,000 Required: 1. Calculate the return on investment (ROI) for each division. (Round your answers to 2 decimal places. (i.e. .1234 = 12.34%)) 2. Calculate the residual income (RI) for each division. 3. Calculate EVA for each division. Soap Products Hair Products Skin Lotions % Return on investment (ROI) Residual inco (RI) 3. EVA

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

An ICER value indicates which of two treatment options is better.

Answered: 1 week ago