Required

1. Translate the French and Australian information into dollars to make the divisions comparable. Find the after-tax operating income for each division and compare the profits.

2. Calculate ROI using after-tax operating income. Compare among divisions.

3. Use after-tax operating income and the individual cost of capital of each division to calculate residual income and compare.

4. Redo requirement 2 using pretax operating income instead of net income. Why is there a big difference, and what does this mean for performance evaluation?

Newmann, Inc. has divisions in the United States, France, and Australia. The U.S. division is the oldest and most established of the three and has a cost of capital of 6%. The French division was started four years ago when the exchange rate for the Euro was 1 Euro-$1.34 USD. The French division has a cost of capital of 8%. The division in Australia was started this year, when the exchange rate was 1 Australian Dollar (AUD)-$087 USD. Its cost of capital is 11%. Average exchange rates for the current year are 1 euro - $1.07 and 1 AUD $0.74 USD Other information for the three divisions includes: Long-term assets Operating revenues Operating expenses Income-tax rate United States S22,048,000 31,826,170 S26,738,330 35% France 11,422,761 euros 7,023,860 euros 4,980,290 euros 30% Australia 8,798,851 AUD 4,509,628 AUD ,216,892 AUD 20%