Performance Auto Company operates a new car division and a performance parts division. The following are the two divisions financial information for 2014:

(Unit: $000)

New Car Division Performance Parts Division

Total Assets $33,000 $28,500

Current Liabilities 6,600 8,400

Operating Income 2,475 2,565

The companys required rate of return is 12% and tax rate is 40%.

Required:

1. Evaluate performance of the two divisions based on their return on investment (ROI).

2. Evaluate performance of two divisions based on their residual income (RI).

3. The company has two sources of funds: long-term debt with a market value of $18,000 at an annual interest rate of 10% and equity capital with a market value of $12,000 and cost of equity of 15%. Evaluate the two divisions based on their economic value added (EVA).

4. Using the performance evaluations based on ROI, RI, and EVA, comment on the relative performance of each division.