Question 1: Canada Axle, Inc. has two divisions: Commercial Truck and Automobile. Information for the divisions is below.

Automobile Commercial Truck

Operating Income $360,000 $80,000

After-tax Operating Income $240,000 $50,000

Average Operating Assets $4,000,000 $220,000

Average Current Liabilities $800,000 $70,000

Net Sales $5,000,000 $200,000

(a) Return on Investment: What is the R.O.I. for each division?

(b) Residual Income: If management sets a Minimum Required Rate of Return (RROR) of 10%, what is the Residual Income for each division?

(c) Economic Value Added: What is the EVA for each division?