Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Factory Accounts

Authors: John Whitmore

1st Edition

0367494825, 9780367494827

Students also viewed these Accounting questions

Question

=+How are the first copy costs and distribution costs comprised?

Answered: 1 week ago