Question
Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information
| Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information about the most recent years operations follows. The information includes the value of intangible assets, including research and development, patents, and other innovations that are not included on HSCs balance sheet. Were these intangibles to be included in the financial statements (as they are for EVA), the increase in the balance sheet and the increase in after-tax operating income would be as given below. |
| Division | Operating Income | Average Total Assets | Value of Intangibles | Intangibles Effect on Income | ||||||||
| Soap products | $ | 3,246,000 | $ | 59,996,000 | $ | 1,496,000 | $ | 996,000 | ||||
| Skin lotions | 2,746,000 | 32,996,000 | 7,996,000 | 5,996,000 | ||||||||
| Hair products | 4,996,000 | 54,996,000 | 996,000 | 696,000 | ||||||||
| Minimum desired rate of return | 5.00 | % | ||||||||||
| Cost of capital | 4.00 | % | ||||||||||
| 1. Calculate the return on investment (ROI) for each division.
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Essential Strategies For Financial Services Compliance
Authors: Annie Mills, Peter Haines
2nd Edition
1118906136, 978-1118906132
