QUESTION 4

1. Heatherton corp. is a therapy service provider that strongly believes in using multiple financial measures to evaluate the performance of its divisions. The Chattanooga, TN facility has the following operation and performance information:

   Sales revenue	1000000
   Operating income	200000
   Total Assets	1250000
   Current liabilities	249000
   Debt ( @ 8% interest)	570000
   Common equity	430000
   Tax rate	20%
   Required Rate of Return	9%

   What is their residual income using total assets as the measure of investment?

12.5 points

QUESTION 5

1. Heatherton corp. is a therapy service provider that strongly believes in using multiple financial measures to evaluate the performance of its divisions. The Chattanooga, TN facility has the following operation and performance information:

   Sales revenue	1300000
   Operating income	190000
   Total Assets	1240000
   Current liabilities	247000
   Debt ( @ 9% interest)	620000
   Common equity	430000
   Tax rate	30%
   Required Rate of Return	14%

   What is their residual income the using measure of investment most commonly used in EVA?

12.5 points

QUESTION 6

1. Heatherton corp. is a therapy service provider that strongly believes in using multiple financial measures to evaluate the performance of its divisions. The Chattanooga, TN facility has the following operation and performance information:

   Sales revenue	1300000
   Operating income	190000
   Total Assets	1240000
   Current liabilities	247000
   Debt ( @ 9% interest)	620000
   Common equity with a 12% cost of equity	430000
   Tax rate	30%
   Required Rate of Return	14%

   What is Heatherton's Weighted Average Cost of Capital that would be used in EVA?

12.5 points

QUESTION 7

1. Heatherton corp. is a therapy service provider that strongly believes in using multiple financial measures to evaluate the performance of its divisions. The Chattanooga, TN facility has the following operation and performance information:

   Sales revenue	1000000
   Operating income	200000
   Total Assets	1200000
   Current liabilities	250000
   Debt ( @ 8% interest)	610000
   Common equity with a 12% cost of equity	440000
   Tax rate	20%
   Required Rate of Return	9%

   What is Heatherton's after tax income that would be used in EVA?

12.5 points

QUESTION 8

1. Heatherton corp. is a therapy service provider that strongly believes in using multiple financial measures to evaluate the performance of its divisions. The Chattanooga, TN facility has the following operation and performance information:

   Sales revenue	1300000
   Operating income	190000
   Total Assets	1260000
   Current liabilities	250000
   Debt ( @ 6% interest)	590000
   Common equity with a 12% cost of equity	440000
   Tax rate	20%
   Required Rate of Return	12%

   What is Heatherton's EVA?