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Cocost Multinational, Inc., has divisions in Canada, Germany, and New Zealand. The Canadian division is the oldest and most established of the three and
Cocost Multinational, Inc., has divisions in Canada, Germany, and New Zealand. The Canadian division is the oldest and most established of the three and has a cost of capital of 6.1%. The German division was started 3 years ago when the exchange rate for the euro was 1 euro = $1.35. The German division is a large and powerful division of Cocost, Inc., with a cost of capital of 8%. The New Zealand division was started this year, when the exchange rate was 1 New Zealand Dollar (NZD) = $0.75. Its cost of capital is 11%. Average exchange rates for the current year are 1 euro = $1.40 and 1 NZD = $0.65. Other information for the three divisions is provided: (Click the icon to view the division data.) Required ... Requirement 1. Translate the German and New Zealand information into dollars to make the divisions comparable. Find the after-tax operating income for each division and compare the profits. (Round the after-tax operating income to the nearest whole dollar.) After-tax operating income Canada Germany New Zealand - $ 0 Division data Canada Germany New Zealand Long-term Assets $ 24,199,000 11,860,231 euros 7,344,437 NZD Operating Revenues $ 23,394,710 6,130,000 euros 5,716,180 NZD Operating Expenses 18,550,000 4,200,000 euros 4,370,000 NZD Income-tax rate 39% 33% 24% Print Done Required 1. Translate the German and New Zealand information into dollars to make the divisions comparable. Find the after-tax operating income for each division and compare the profits. 2. Calculate ROI using after-tax operating income. Compare among divisions. 3. Use after-tax operating income and the individual cost of capital of each division to calculate residual income and compare. 4. Redo requirement 2 using pretax operating income instead of net income. Why is there a big difference, and what does it mean for performance evaluation? Print Done -
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