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Hi, Could someone please help me answer this question. Excel and/or a calculator can be used. Cappa Corporation has two divisions: Alpha and Beta. The
Hi,
Could someone please help me answer this question. Excel and/or a calculator can be used.
Cappa Corporation has two divisions: Alpha and Beta. The company is adopting a responsibility accounting approach to setting budgets and rewarding employees and is reviewing the best way to measure performance of its investment divisions. You are advised that the firm has a long term cost of capital of 16%. You are provided with the following information relating to the firms trading figures. The company does not allocate the cost of long term debt to its divisions. Alpha Division Beta Division Total Sales 6,250,000 1,150,000 7,400,000 Less: Direct Labour & Materials 4,250,000 375,000 4,625,000 Other Expenses 150,000 75,000 225,000 4,400,000 450,000 4,850,000 Operating Income 1,850,000 700,000 2,550,000 Interest on Long-Term Debt 400,000 Net Income Before Tax 2,150,000 Average Book Values Total Assets 12,500,000 9,500,000 Calculate the Return on Investment (ROI) for the Alpha Division (answer in % form to two decimal places eg. show 16.49% as 16.49, not as 0.1649. Do not include % symbol)Step by Step Solution
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