Question 1: Return on investment (ROI), residual income (RI) Generic Motors Corporation has two divisions. Division A Division B Investment operating assets) $300,000 $1,200,000 Profit $60,000 $180,000 The required rate of return (cost of capital) is 10% a year. a) Compute return on investment (ROI) for each division. ROI for A = % (if your answer is 9.5%, enter 9.5 without the percent sign) ROI for B = % b) Compute the residual income (RI) for each division. RI for A = $ RI for B - $ In year 2016, Apple Inc. had profit margin of 27.8% (i.e., it generated 27.8 cents of profit per dollar of sales) and asset turnover of 0.670 (i.e., it generated 67.0 cents of annual sales per dollar of assets). a) The profit margin indicates that Apple has O low pricing power -- it cannot charge high prices relative to costs O high production efficiency -- it has very low costs high pricing power -- it can charge high prices relative to costs The asset turnover indicates that Apple is O extremely efficient in generating assets per dollar of sales O extremely efficient in generating sales per dollar of assets relatively inefficient in generating sales per dollar of assets b) Compute Apple's return on investment (ROI) ROI = % (if your answer is 15.3%, enter 15.3 without the percent sign; round your answer to one digit after the decimal point, i.e., enter 15.3 not 15 or 15.332) c) Huawei Technologies is a major manufacturer of low-cost Android phones. Think about Apple vs Huawei. Which company likely has higher profit margin? Apple Huawei Which company likely has higher asset turnover? O Apple Huawei Question 3: Economic value-added (EVA). Net operating profit before taxes is $1,400. Total assets (invested capital) are $9,000, and current liabilities are $1,100. The weighted average cost of capital (WACC) is 13%. The tax rate 20%. Compute the economic value added (EVA). NOPAT = $ EVA = $ (if you get a negative number, enter it with a minus sign, i.e., -100 not ($100))