Required 1. Calculate return on investment (ROI) for each division using operating income as a measure of income and total assets as a measure of investment. 2. Calculate residual income (RI) for each division using operating income as a measure of income and total assets minus current liabilities as a measure of investment. 3. William Abraham, the New Car Division manager, argues that the Performance Parts Division has "loaded up on a lot of short-term debt" to boost its RI. Calculate an alternative RI for each division that is not sensitive to the amount of short-term debt taken on by the Performance Parts Division. Comment on the result. 4. Hot Rod Auto Company, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $20,000,000 at an interest rate of 10% and equity capital with a market value of $13,000,000 and a cost of equity of 14%. Applying the same weighted-average cost of capital (WACC) to each division, calculate economic value added (EVA) for each division. 5. Use your preceding calculations to comment on the relative performance of each division. al place in the format X.X%.) CarDivisionrmancePartsDivision111x100=100=x100=ROI%% er residual losses.) that is not sensitive to the amount of short-term debt taken on by the Performance Parts Division. Comment on the result. (Use parentheses or a minus sign to enter residual losses.) $13,000,000 and a cost of equity of 14%. Applying the same weighted-average cost of capital (WACC) to each division, calculate economic value added (EVA) for each division. Begin by determining the formula to calculate WACC. Begin by determining the formula to calculate WACC. 1+(x x= I = The company's WACC is (Enter the amount as a decimal. Round the WACC to five decimal places in the format X.XXXXX.) Performance Parts Division: rement 5 . Use your preceding calculations to comment on the relative performance of each division. he residual income and the EVA calculations indicate that the Division is performing nominally better than the other division. The Division has a higher residual inco NA for indicates that, on an after-tax basis, the division(s) is (are) value