Finores Ltd operates a chain of budget seafood restaurants as well as its own fishing fleet. Finores is structured into three divisions: the Negro Division and the Sina Division, which manage restaurants, and the Fleet Division which operates a fishing fleet.

The company uses return on investment to evaluate the performance of each division. For the purpose of calculating divisional ROI, invested capital is defined as total assets less current liabilities, and divisional operating profit after tax is used. Each division is required to achieve an ROI of at least 9% after tax. The weighted average cost of capital is 7%. The company income tax rate is 30%.

The following data relates to the financial performance for the last year:

	Sina Division	Negro Division	Fleet Division
Operating profit before tax	$ 150,000	$ 38,000	$ 25,000
Total assets	1,420,000	207,000	650,000
Current liabilities	310,000	85,000	73,000

Two years ago, the Fleet Division replaced most of its assets. The Sina Division is the oldest division and owns all of its assets, while the Negro Division leases most of its restaurant sites. The lease payments are treated as an expense.

Required:

1. Under what situation is it appropriate to measure invested capital as total assets less current liabilities? (1 mark)

2. Calculate the ROI for each division for last year and compare the performance of the three divisions based on ROI. (2 marks)

3. Is there any other information in the problem that needs to be taken into account when interpreting divisional performance using ROI? (3 marks)

4. Calculate the EVA for each division for last year and compare the performance of the three divisions based on EVA. (2 marks)

5. Outline two strategies managers can use to maximise EVA. (1 mark)