Question 33

The Tandem division of Great Adventures Cycle Company had the following results last year (in thousands):

• Sales$6,000,000
• OperatingIncome$280,000
• TotalAssets? ? ?
• Current Liabilities$500,000

Management's target rate of return is 8% and the weighted average cost of capital is 6%. Tandem's effective tax rate is 30%.

If Tandem's Asset Turnover = 4.0, what is the company's Return on Investment?

A.Tandem's ROI is: 8.00%

B.Tandem's ROI is: 4.67%

C.ROI cannot be calculated with the given information.

D.Tandem's ROI is: 14.00%

E.Tandem's ROI is: 18.67%

Question 2

The following information relates to the Miracle Corporation and its Toy Division:

• Toy DivisionSales$8,000,000
• Toy Division OperatingIncome? ? ?
• Toy Division TotalAssets$3,000,000
• Toy Division CurrentLiabilities$750,000
• Corporate rate of return target12%
• Corporate weighted average cost of capital8%
• Corporate effective tax rate25%
• ResidualIncome$120,000

Based on the above information, what is the Toy Division's Economic Value added?

A.The Toy Division's Economic Value Added (EVA) is $180,000.

B.EVA cannot be calculated with the given information.

C.The Toy Division's Economic Value Added (EVA) is $ 90,000.

D.The Toy Division's Economic Value Added (EVA) is $240,000.

E.The Toy Division's Economic Value Added (EVA) is $120,000.

Only the answer . No need for explanation