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Outdoor Equipments Inc. has two divisions: an Outdoor Structures division and a Landscaping division. Below is some information on each division: Outdoor Structures Landscaping Revenue
Outdoor Equipments Inc. has two divisions: an Outdoor Structures division and a Landscaping division. Below is some information on each division: Outdoor Structures Landscaping Revenue 30,000,000 $ 62,000,000 COGS 23,000,000 $ 48,000,000 Depreciation 4,500,000 $ 6,600,000 Interest Expense 600,000 $ 1,900,000 S 1,900,000 $ 5,500,000 Income before Taxes Average Operating Assets 16,000,000 6,000,000 $ $ 43,000,000 20,000,000 Debt Shareholders' Equity S 6,000,000 $ 60,000,000 Outdoor Equipments Inc. faces a tax rate of 25%. (a) Compute the ROI of the two divisions. If the two divisions are evaluated on ROI, which division is the better performer? (0.5 point) (6) Compute the RI of the two divisions assuming that both divisions have a cost of equity of 15%. If the two divisions are evaluated on RI, which division is the better performer? (0.5 point) (c) Compute the RI of the two divisions assuming that both divisions have a cost of equity of 25%. If the two divisions are evaluated on RI, which division is the better performer? (0.5 point)
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