Superstitch Products is a division of Robinson Textiles Inc. During the coming year, it expects to earn

income of $310,000 based on sales of $3.45 million. Without any new investments, the division

will have average operating assets of $3 million. The division is considering a capital investment

project - adding knitting machines to produce gaiters - that requires an additional investment

of $600,000 and increases net income by $57,500 (sales would increase by $575,000). If made,

the investment would increase beginning operating assets by $600,000 and ending operating

assets by $400,000. Assume that the actual cost of capital for the company is 7%.

(Round all answers to four decimal places).

Part Three: Compute the ROI for the division with the new investment. Should the manager approve the investment?
Proposal for the Division:
Current Operating Income
Current Investment Base
ROI
Part Four: Compute the margin and turnover ratios for the division with the new investment.
Margin
Turnover
Part Five: Compute the Economic Value Added of the division with and without the investment.
Should the machine be invested in by the division manager?
EVA w/o Investment
EVA with Investment