MC1. Which of the following changes would NOT change return on investment (ROI)?

a.	Decrease sales and expenses by the same percentage.
b.	Increase total assets.
c.	Increase sales dollars by the same amount as total assets.
d.	Decrease sales and expenses by the same dollar amount.

MC2. If the operating asset turnover increased by 50 percent and the margin increased by 50 percent, the ROI would increase by:

a. 50%.

b. 25%.

c. 100%.

d. 125%.

e. no change

Problem #1

Below is information for Division Z:

	Division Z
Sales	1,250,000
Operating income	$75,000
Operating assets	?
ROI	15%
Operating income Margin	?
Operating assets Turnover	?
Minimum rate of return	10%

Required:

1) What is the residual income for Division Z?

2) What is the turnover for Division Z?

	4.

Problem #2

The MistleToe Corporation sells Christmas decorations. They had the following financial information for 2019:

Pre-Tax Operating Profit		$6,000,000
Total Capital employed		$12,000,000
Amount of Debt		$8,000,000
MV of Equity		$4,000,000
Pre-tax cost of debt		12%
Securities premium over risk-free rate		9%
Risk-Free rate		6%
Tax rate		35%

The MistleToe Corporation has decided to implement an EVA bonus plan for its top executives.

Required: Calculate the Economic Value Added (EVA) to the corporation in 2019.