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Isabelle Abiassi operates a popular summer camp for elementary school children. Projections for the current year are as follows Sales revenue Operating income 745,000 Average
Isabelle Abiassi operates a popular summer camp for elementary school children. Projections for the current year are as follows Sales revenue Operating income 745,000 Average assets $4,240,000 $8,400,000 The camp's weighted-average cost of capital is 11%, and Isabelle requires that all new investments generate a return on investment of at least 1696. The camp's current tax rate is 25%. At last week's advisory board meeting, Isabelle told the board that she had up to $50,000 to invest in new facilities at the camp and asked them to recommend some projects. Today the board's president presented Isabelle with the following list of three potential investments to improve the camp facilities. Swimming Pool $5,740 41,000 Playground 4,336 27,100 Gym $ 2,790 15,500 Incremental operating income Average total assets (a) Calculate the return on investment, residual income, and economic value added for each of the three projects. (Enter negative amounts using either a negative sign preceding the number, e.g. -45 or parentheses, e.g. (45). Round Economic Value Added answer to 2 decimal places, e.g. 15.25 & all other answers to 0 decimal places, e.g. 15 or 15%.) Playground Pool Gym Return on Investment Residual Income Economic Value Added $ LINK TO TEXT LINK TO TEXT LINK TO VIDEO LINK TO VIDEO
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