Problem #1

Below is information for Division Z:

	Division Z
Sales	1,250,000
Operating income	$75,000
Operating assets	?
ROI	15%
Operating income Margin	?
Operating assets Turnover	?
Minimum rate of return	10%

Required:

1) What is the residual income for Division Z?

2) What is the turnover for Division Z?

	4.

Problem #2

The MistleToe Corporation sells Christmas decorations. They had the following financial information for 2019:

Pre-Tax Operating Profit		$6,000,000
Total Capital employed		$12,000,000
Amount of Debt		$8,000,000
MV of Equity		$4,000,000
Pre-tax cost of debt		12%
Securities premium over risk-free rate		9%
Risk-Free rate		6%
Tax rate		35%

The MistleToe Corporation has decided to implement an EVA bonus plan for its top executives.

Required: Calculate the Economic Value Added (EVA) to the corporation in 2019.