Question
Oak Ridge Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. Information related to
Oak Ridge Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. Information related to the two subsidiaries follows:
Hazardous Waste | Residential Waste | |
Total Assets | $15,232,900 | $86,750,000 |
Noninterest-bearing current liabilities | 3,272,200 | 13,028,200 |
Net income | 1,889,900 | 6,642,300 |
Interest expense | 1,450,100 | 7,990,100 |
Required Rate of return | 10% | 13% |
Tax rate | 40% | 40% |
Calculate ROI for both subsidiaries. (Round answers to 2 decimal places, e.g. 15.32%.)
Calculate EVA for both subsidiaries. Note that since no adjustments for accounting distortions are being made, EVA is equivalent to residual income. (Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)
Which subsidiary has added the most to shareholder value in the last year?
Based on the limited information, which subsidiary is the best candidate for expansion?
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