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Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its standalone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2013, Hamiltons CFO received the following information about the performance of the property/casualty division:

Sales revenues $1,200,000

Operating income 200,000

Total assets 1,250,000

Current liabilities 250,000

Debt (interest rate: 6.25%) 600,000

Common equity 400,000

For the purpose of divisional performance evaluation, Hamilton defines investment as total assets and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 20% in taxes on its income.

1.) What was the net income after taxes of the property/ casualty division?

2.) What was the divisions ROI for the year?

3.) Based on Hamiltons required rate of return of 10%, what was the property/ casualty divisions residual income for 2013?

4.) Hamiltons CFO has heard about EVA and is curious about whether it might be a better measure to use for evaluating division managers. Hamiltons four divisions have similar risk characteristics. Hamiltons debt trades at book value while its equity has a market value approximately twice that of its book value. The companys cost of equity capital is 12%. Calculate each of the following components of EVA for the property/ casualty division, as well as the final EVA figure:

a.) Net operating profit after taxes

b.) Weighted-average cost of capital

c.) Investment, as measured for EVA calculations