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Please provide formulas and explanations, thanks. WestCo has two divisions, a tax rate of 34%, and a minimum rate of return of 24%. Division A
Please provide formulas and explanations, thanks.
WestCo has two divisions, a tax rate of 34%, and a minimum rate of return of 24%. Division A has a weighted average cost of capital of 10% and is looking at a new project that will generate a profit of $825,000 from a machine that costs $3,300,000. Division B has a weighted average cost of capital of 7% and is looking at a new project that will generate a profit of $875,000 from a machine that costs $3,500,000. a) Calculate the EVA for each of WestCo's divisions. b) Calculate the RI for each of WestCo's divisions. c) If WestCo uses EVA to evaluate the projects, which division has the better project and by how much? d) If WestCo uses RI, which division has the better project and by how muchStep by Step Solution
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