Question
ROI and EVA The Bella Vista Woodwork Company uses return on investment and economic value added as performance evaluation measures for its division managers. The
ROI and EVA
The Bella Vista Woodwork Company uses return on investment and economic value added as performance evaluation measures for its division managers. The company's weighted average cost of capital is 10 percent. Assume a tax rate of 20 percent. Financial data for the company's three divisions follow. (all currencies converted to US $)
US Division Asia Division Europe Division
Sales $300,000 $375,000 $450,000
Operating Income 25,000 28,000 29,500
Average operating Assets 150,000 125,000 175,000
Average Current liabilities 10,000 5,000 15,000
Weighted average cost of capital 10% 10% 10%
a. Compute the return on investment for each division
b. Compute the economic value added amount for each division
c. Which division's manager is performing the best using ROI? (show work)
d. Which division manager is performing the best using economic value added? (show work)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started