Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ROI and EVA. Saints, Inc., has the following data available for two of its divisions for last year: Rugby Cricket $230,000 $520,000 Contribution Margin 90,000

ROI and EVA. Saints, Inc., has the following data available for two of its divisions for last year: Rugby Cricket $230,000 $520,000 Contribution Margin 90,000 220,000 Operating Income 60,000 90,000 Average Operating Assets 180,000 380,000 Average Current Liabilities 20,000 30,000 Weighted Average Cost of Capital 10% 10% The tax rate for Saints, Inc., is 30 percent. a. Compute the following for each division: 1. Sales margin 2. ROI 3. EVA b. Briefly discuss which division appears most successful and why. c. Assume a prospective project for the Rugby Division has operating income of $10,000, average operating assets of $60,000, average current liabilities of $4,000, and has a positive net present value. Assume the manager of this division is evaluated based on ROI for merit pay and promotion. Would that manager want to go ahead with this prospective project? Would your answer change if the manager were evaluated based on EVA? If so, how and why would your answer change

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting For Value

Authors: Stephen Penman, S Penman

1st Edition

0231151187, 9780231151184

More Books

Students also viewed these Accounting questions

Question

13. Give four examples of psychological Maginot lines.

Answered: 1 week ago