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Sapsora Company uses ROl to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two
Sapsora Company uses ROl to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown as follows. The company's weighted-average cost of capital is 12 percent $ 6, 180, 000 s 650,000 $1, 060, 000 ivision $8,570, 000 $1,850,000 $1,202,800 Current liabilities After-tax operating income ROI 22% 14% a. Which division is more profitable in absolute dollars? b. Compute the EVA for Division A and Division B c. Suppose the manager of Division A was offered a one-year project that would increase his investment base by $300,000 and show a profit of $39,000. Would the manager be motivated to invest in the new project
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