Quesmow 2 a) Chernas Corp is a reiraurance and francial services compary. Chennai stangly beleves and residual inoome. For the year erded December 31. 2021, Cherna's CFO recelved the folowing ffomation about the pertormance of the personailfe divion: For the puppeses of didsional performance evatuation. Cherna defines invenmert in tota: assets and income as operaling inceme (hel is. income belore interest and taumi). The frm pays a tat rate of 19% in taxes on is income. Chenars CFO has heard about EVAre and in carious about whether E mgy be a bether measure so ves for evaluating division managers. Cherroirs four divisions have simber nisk. characteristics. Chennars debt brades af 100% of bock value while ts equey has a maket Requirement 0 Calcuate the divinioni RDI tor the year. [1 Mark] residual inoome for 2021 . [2 *arks] ) Calouate EVA' for the personaile division. [7 Warks] b) Florence Company of Ealy sels electronic equpment and is aboul to launch a new product onto the market The coeration manage needs to prepare the budoet for the eoming yos: launch the product at a price of ESO of ESg per unat The folowing information has been obtained trom market research Page 3 of 7 Accroosuarzoz2 Variable product coets would be E17 per unt it the number of unts produced per year is to to and including 185,000 units. Hovever, f production exceeds 185,000 unes each year, the variabie pocduction cost per unit is expected to fall bo f+5 for af unib produced. Acvertising costs ure expected to be Elos .000 per arnum at as teting price of fSO and c500.000 per imnum at a price of 153 . Fbeed producton beats would be ESO0,000 per annum. Requirement: 10. Calouate each of the six possate prolit outcomes which could arise for Florence in the eoming year. [4 Marks] a) Cabodate the expected value of proff for each of the two price optons and recommend on thes bass. which opton Forence should choose. [4 Marks] to decde which price sheula be charged. [ 2 Warks ] Total 20 Marks Quesmow 2 a) Chernas Corp is a reiraurance and francial services compary. Chennai stangly beleves and residual inoome. For the year erded December 31. 2021, Cherna's CFO recelved the folowing ffomation about the pertormance of the personailfe divion: For the puppeses of didsional performance evatuation. Cherna defines invenmert in tota: assets and income as operaling inceme (hel is. income belore interest and taumi). The frm pays a tat rate of 19% in taxes on is income. Chenars CFO has heard about EVAre and in carious about whether E mgy be a bether measure so ves for evaluating division managers. Cherroirs four divisions have simber nisk. characteristics. Chennars debt brades af 100% of bock value while ts equey has a maket Requirement 0 Calcuate the divinioni RDI tor the year. [1 Mark] residual inoome for 2021 . [2 *arks] ) Calouate EVA' for the personaile division. [7 Warks] b) Florence Company of Ealy sels electronic equpment and is aboul to launch a new product onto the market The coeration manage needs to prepare the budoet for the eoming yos: launch the product at a price of ESO of ESg per unat The folowing information has been obtained trom market research Page 3 of 7 Accroosuarzoz2 Variable product coets would be E17 per unt it the number of unts produced per year is to to and including 185,000 units. Hovever, f production exceeds 185,000 unes each year, the variabie pocduction cost per unit is expected to fall bo f+5 for af unib produced. Acvertising costs ure expected to be Elos .000 per arnum at as teting price of fSO and c500.000 per imnum at a price of 153 . Fbeed producton beats would be ESO0,000 per annum. Requirement: 10. Calouate each of the six possate prolit outcomes which could arise for Florence in the eoming year. [4 Marks] a) Cabodate the expected value of proff for each of the two price optons and recommend on thes bass. which opton Forence should choose. [4 Marks] to decde which price sheula be charged. [ 2 Warks ] Total 20 Marks