Dubois Garage Doors (DGD) Ltd., has two divisionsDoors and Electronic Components, which operate in a decentralized manner. The financial information of each division is shown as follows:

The manager of the Electronic Components has an opportunity to invest in a new machine costing $585,000 with a useful life of 5 years. The new machine will have no residual value at the end of the 5th year. The new machine will be able to reduce the direct materials and direct labour by 10% and variable overhead by 5%. The existing machine was purchased 5 years ago for $457,000, and can last for another 5 years with no residual value in 5 years time. If the new machine is purchased, the existing machine can be sold for $45,000. The new machine will be financed through debt and equity with the same current capital structure, and the same cost of debt and equity in the Electronic Components division.

1.

2. Calculate the net present value for the new investment project for the Electronic Components division, using the WACC as the discount rate. (Round present value factor calculations to 4 decimal places, e.g. 1.2513 and final answer to 0 decimal places, e.g. 125. Enter negative amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net Present Value: $______________

3. Calculate the ROI, RI, and EVA for the new investment project, using the WACC for the investment. (Round ROI and WACC calculations to 2 decimal places, e.g. 15.26%. Round RI and EVA to 0 decimal places, e.g. 125.)

Electric Components Doors Sales $1,190,000 $2,530,000 Variable Costs: Direct Materials 166,600 328,900 Direct Labour 404,600 885,500 Variable Overhead 119,000 202,400 Total Variable Costs: 690,200 1,416,800 499,800 1,113,200 Contribution Margin Fixed Overhead (excluding interest expenses) Operating Income (EBIT) 166,600 354,200 333,200 759,000 Total Assets $960,000 $3,010,000 Current Liabilities 192,000 903,000 3:2 1:1 Debt : Equity Cost of Debt Cost of Equity 11 % 9 % 13 % 11 % Tax Rate 30 % 40 % Calculate each division's ROI, RI, and EVA. (Round ROI and WACC calculations to 2 decimal places, e.g. 15.26%. Round RI and EVA to 0 decimal places, e.g. 125.) Electric Components Doors ROI % % RI $ EVA ROI % RI $ $ EVA $ Electric Components Doors Sales $1,190,000 $2,530,000 Variable Costs: Direct Materials 166,600 328,900 Direct Labour 404,600 885,500 Variable Overhead 119,000 202,400 Total Variable Costs: 690,200 1,416,800 499,800 1,113,200 Contribution Margin Fixed Overhead (excluding interest expenses) Operating Income (EBIT) 166,600 354,200 333,200 759,000 Total Assets $960,000 $3,010,000 Current Liabilities 192,000 903,000 3:2 1:1 Debt : Equity Cost of Debt Cost of Equity 11 % 9 % 13 % 11 % Tax Rate 30 % 40 % Calculate each division's ROI, RI, and EVA. (Round ROI and WACC calculations to 2 decimal places, e.g. 15.26%. Round RI and EVA to 0 decimal places, e.g. 125.) Electric Components Doors ROI % % RI $ EVA ROI % RI $ $ EVA $