Question:Telum Ltd manufactures electronic devices and competes on the basis of quality and leadingedge designs. The company has $1,750,000 invested in assets in its Mobile Phone Division. The operating profit before tax of the Mobile Phone Division this year is $325,000. The Tablet Division has $6,000,000 invested in assets and an operating profit before tax this year of $1,050,000. The weighted average cost of capital for Telum (which is also the required rate of return) is 9%. The CEO of Telum Ltd has told the manager of each division that the division that "performs best" this year will get a bonus.

Required:

(a) Calculate the return on investment (ROI) and residual income (RI) for each division, and

briefly explain which manager will get the bonus based on these two measures.

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(b) The manager of the Tablet Division is considering a proposal to invest $120,000 in a new

quality testing system. It is estimated that the new system will decrease operating costs (and

hence increase profits) by $13,000. Is the manager likely to accept the proposal if his bonuses

are based on divisional ROI? Would his decision be in the best interests of Telum Ltd?

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(c) What are the advantages and disadvantages of residual income (RI) compared to return

on investment (ROI)?

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(d) The Mobile Phone Division has $525,000 of current liabilities, whereas the Tablet Division

has only $105,000 of current liabilities. Given a tax rate of 30%, calculate the EVA for each

division.

This is my answer, i tried calculate this question.

Description Mobile Tablet

Operating profit before tax $325,000 $1,050,000

Oprerating profit after tax(70%) $227.500 $735,000

Net Assets = $1,225,000 $5,895,000 Deduct CL from total assets

EVA = $117,250 $204,550

227500-(1225000*0.09)=117250 735000-(5895000*0.09)=204550

(e) The CEO of Telum Ltd is concerned that the focus on financial measures could have an

adverse long-term effect on the viability of the company. Explain how the implementation of

a balanced scorecard would help to address his concerns.

I have some question for part (d) and (e).

For question (d), i tried calculate this question but I'm not sure my answer is correct or not. If my answer is wrong, can you show me correct answer and explain it clearly. I need understand it for my final exam. and part (e) is just need know an answer.