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Endless Inc. presented the ff. info regarding its two divisions classified as investment centers. Jenny Johnny Division Division Operating income P 300,000 P 500,000 Operating
Endless Inc. presented the ff. info regarding its two divisions classified as investment centers. Jenny Johnny Division Division Operating income P 300,000 P 500,000 Operating assets 1,200,000 2,500,000 Net sales 1,500,000 2,750,000 Current Liabilities 240,000 375,000 WACC 15% 12.5% Current Operating 500,000 750,000 Asset The corporation is subject to 35% tax rate. Weighted cost of capital is based on book value of long-term asset. Assuming the imputed interest rate is 18% Requirement: a. In using EVA, what is the EVA of the division that is performing better? b. In using Residual Income, what is the residual income of the division that is performing better? (Use operating income before income tax) c. In using ROI, what is the ROI of the division that is performing better? (Use operating income before income tax)
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