Question
Eban Wares is a division of a major corporation. The following data are for the latest year of operations: Sales $10,000,000 Net operating income $950,000
Eban Wares is a division of a major corporation. The following data are for the latest year of operations: Sales $10,000,000 Net operating income $950,000 Average operating assets $4,000,000 The companys minimum required rate of return 14% The manager of Eban Wares has an opportunity to add a project with the following characteristics: Cost of new equipment $1,200,000 Additional revenues $3,000,000 Additional expenses $2,100,000 Required: a. What is the division's margin (before the new project)? b. What is the division's turnover (before the new project)? c. What is the division's return on investment (ROI) (before the new project)? d. What is the division's residual income (before the new project)? e. What is the division's margin (after the new project is added)? f. What is the division's turnover (after the new project is added)? g. What is the division's return on investment (ROI) (after the new project is added)? h. What is the division's residual income (after the new project is added)?
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