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Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown below. The company's weighted-average cost of capital is 12 percent.

a. Which division is more profitable?

b. Would EVA more clearly show the relative contribution of the two divisions to the company as a whole? Show computations.

c. Suppose the manager of Division A was offered a one-year project that would increase his investment base by $250,000 and show a profit $37,500. Would the manger choose to invest in the new project?

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Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown below. The company's weighted-average cost of capital is 12 percent. Division A Division B Total assets . .. $6,000,000 $8,750,000 Current liabilities . 500,000 1,750,000 After-tax operating income . . . . . . . ... 1,000,000 1,180,000 ROI . . . 25% 14% a. Which division is more profitable? b. Would EVA more clearly show the relative contribution of the two divisions to the company as a whole? Show the computations. c. Suppose the manager of Division A was offered a one-year project that would increase his investment base by $250,000 and show a profit of $37,500. Would the manager choose to invest in the new project

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