Hys is a nationwide hardware and furnishings chain. The manager of the Hys Store in Boise is evaluated using ROI. Hys headquarters requires an ROI of 8 percent of assets. For the coming year, the manager estimates revenues will be $4,820,000, cost of goods sold will be $3,036,600, and operating expenses for this level of sales will be $482,000. Investment in the store assets throughout the year is $3,530,000 before considering the following proposal.

A representative of Ace Appliances approached the manager about carrying Ace's line of appliances. This line is expected to generate $1,390,000 in sales in the coming year at Hys Boise store with a merchandise cost of $1,056,400. Annual operating expenses for this additional merchandise line total $153,000. To carry the line of goods, an inventory investment of $960,000 throughout the year is required. Ace is willing to floor-plan the merchandise so that the Hy store will not have to invest in any inventory. The cost of floor planning would be $120,800 per year. Hys marginal cost of capital is 8 percent. Ignore taxes.

Required:

e-1. What is Hy's Boise store's expected EVA for the coming year if it does not carry Ace's appliances? Regular Merchandise Operating profit Capital cost Economic value added (EVA) e-2. What is the store's expected EVA if the manager invests in Ace's inventory and carries the appliance line? Regular Merchandise & Appliances Operating profit Capital cost Economic value added (EVA) e-3. What would the store's expected EVA be if the manager elected to take the floor plan option? Floor Plan Operating profit Capital cost Economic value added (EVA)