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It is the end of the third quarter, and Elizabeth is evaluating the performance of two key divisions in the company. Both divisions had $54,000
It is the end of the third quarter, and Elizabeth is evaluating the performance of two key divisions in the company. Both divisions had $54,000 cash available for investment in the fourth quarter, so Elizabeth is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 9%, while its weighted average cost of capital is 8%. Its effective tax rate is 25% (a) Calculate the current ROI, RI, and EVA for each division through the third quarter. For ROI purposes, operating assets are considered investments. (Enter ROI as a decimal, not as a percentage. Round ROI to 4 decimal places, e.g. 0.1526. Enter negative amounts with either a - sign e.g. - 15,000 or in parenthesis e.g. (15,000).) (b) X Your answer is incorrect. How much would each division need to generate in new operating income in the fourth quarter to reach the company's desired ROI of 12% at year-end, assuming each division uses its available $54,000 to purchase a new investment? Assume it is a $54,000 nondepreciable asset but still included in operating assets
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