Question
Question 6 Time: 20 minutes Total: 12 marks Marys Auto Shop Inc. allows its divisions to operate as autonomous units. Their results for the current
Question 6
Time: 20 minutes
Total: 12 marks
Marys Auto Shop Inc. allows its divisions to operate as autonomous units. Their results for the current year were as follows:
| Sport | Terrain | City |
Revenues | $1,700,000 | $800,000 | $6,000,000 |
Current assets | 230,000 | 40,000 | 410,000 |
Capital assets | 870,000 | 660,000 | 1,590,000 |
Current liabilities | 100,000 | 100,000 | 500,000 |
Net operating income | 234,000 | 44,000 | 604,000 |
After-tax income | 188,000 | 36,000 | 484,000 |
Weighted average cost of capital | 10% | 10% | 10% |
Required:
For each division compute (to two decimal) the:
- Return on sales in %
2. Return on investment (to two decimal) based on total assets employed in %
3. Economic value-added
4. Residual income based on net operating income.
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