Problem 1

The following data pertain to Dakota Division's most recent year of operations.

Income$4,000,000

Sales revenue50,000,000

Average invested capital20,000,000

Required:

Compute Dakota Division's sales margin, capital turnover, and return on investment for the year.(Round "Capital turnover" answer to 1 decimal place.)

Problem 2

The following data pertain to Dakota Division's most recent year of operations.

Income$4,000,000

Sales revenue50,000,000

Average invested capital20,000,000

Assume that the company's minimum desired rate of return on invested capital is 11 percent.

Required:

Compute Dakota Division's residual income for the year.

Problem 3

Golden Gate Construction Associates, a real estate developer and building contractor in San Francisco, has two sources of long-term capital: debt and equity. The cost to Golden Gate of issuing debt is the after-tax cost of the interest payments on the debt, taking into account the fact that the interest payments are tax deductible. The cost of Golden Gate's equity capital is the investment opportunity rate of Golden Gate's investors, that is, the rate they could earn on investments of similar risk to that of investing in Golden Gate Construction Associates. The interest rate on Golden Gate's $60 million of long-term debt is 10 percent, and the company's tax rate is 40 percent. The cost of Golden Gate's equity capital is 15 percent. Moreover, the market value (and book value) of Golden Gate's equity is $90 million.

Required:

Calculate Golden Gate Construction Associates' weighted-average cost of capital.(Round your answer to 1 decimal place (i.e., .1234 should be entered as 12.3))

Problem 4

Golden Gate Construction Associates, a real estate developer and building contractor in San Francisco, has two sources of long-term capital: debt and equity. The cost to Golden Gate of issuing debt is the after-tax cost of the interest payments on the debt, taking into account the fact that the interest payments are tax deductible. The cost of Golden Gate's equity capital is the investment opportunity rate of Golden Gate's investors, that is, the rate they could earn on investments of similar risk to that of investing in Golden Gate Construction Associates. The interest rate on Golden Gate's $60 million of long-term debt is 10 percent, and the company's tax rate is 40 percent. The cost of Golden Gate's equity capital is 15 percent. Moreover, the market value (and book value) of Golden Gate's equity is $90 million.

The company has two divisions: the real estate division and the construction division. The divisions' total assets, current liabilities, and before-tax operating income for the most recent year are as follows: