Question
Laura Hall operates a popular summer camp for elementary school children. Projections for the current year are as follows: sales revenue$8,460,000Operating income$750,750Average assets$4,272,000 The camps
Laura Hall operates a popular summer camp for elementary school children. Projections for the current year are as follows:
sales revenue$8,460,000Operating income$750,750Average assets$4,272,000
The camps weighted-average cost of capital is 11%, and Laura requires that all new investments generate a return on investment of at least 15%. The camps current tax rate is 30%. At last weeks advisory board meeting, Laura told the board that she had up to $70,000 to invest in new facilities at the camp and asked them to recommend some projects. Today the boards president presented Laura with the following list of three potential investments to improve the camp facilities.
Playground | Swimming Pool | Gym | |||||||
---|---|---|---|---|---|---|---|---|---|
Incremental operating income | $ 1,950 | $ 7,380 | $ 4,250 | ||||||
Average total assets | 15,000 | 41,000 | 25,000 |
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 Return on Investment 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 | enter percentages rounded to 2 decimal places | % | enter percentages rounded to 2 decimal places | % | enter percentages rounded to 2 decimal places | % | |||
Residual Income | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places | ||||||
Economic Value Added | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places |
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