Item$3$

$2\mathrm{.}5$

points

eBookAskPrintReferencesCheck my workCheck My Work button is now enabled$3$Item $3$

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 year$$s operations follows. The information includes the value of intangible assets, including research and development, patents, and other innovations that are not included on HSC$$s 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 $ $3,250,000$ $ $60,000,000$ $ $1,500,000$ $ $1,000,000$

Skin lotions $2,750,00033,000,0008,000,0006,000,000$

Hair products $5,000,00055,000,0001,000,000700,000$

Minimum desired rate of return $5\mathrm{.}00\%$

Cost of capital $4\mathrm{.}00\%$

Required:

$1.$ Calculate the return on investment $($ROI$)$ for each division. $($Round your answers to $2$ decimal places. $($i$.$e$.\mathrm{.}1234=12\mathrm{.}34\%))$

$2.$ Calculate the residual income $($RI$)$ for each division.

$3.$ Calculate EVA$$ for each division.