Question
Consider the following data, which relate to the two divisions of Penny Worth Products: Division 1 Division 2 Total assets $69,400,000 $23,000,000 Noninterest-bearing current liabilities
Consider the following data, which relate to the two divisions of Penny Worth Products:
Division 1 | Division 2 | |||
---|---|---|---|---|
Total assets | $69,400,000 | $23,000,000 | ||
Noninterest-bearing current liabilities | 4,510,000 | 2,320,000 | ||
NOPAT | 11,300,000 | 5,880,000 | ||
Required rate of return | 11% | 10% |
Compare the two divisions in terms of return on investment and residual income. In the past year, which division has created the most wealth for Penny Worth shareholders? (Round ROI to 2 decimal place, e.g. 0.25. Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)
Division 1 | Division 2 | ||||
---|---|---|---|---|---|
ROI | enter ROI rounded to 2 decimal places | enter ROI rounded to 2 decimal places | |||
Residual income/EVA | enter Residual income/EVA in dollars rounded to 0 decimal places | enter Residual income/EVA in dollars rounded to 0 decimal places |
select a division Division 2Division 1 had highest return on investment. |
select a division Division 2Division 1 had highest residual income. |
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