Question
The following information was compiled by the company's accountant for one of the company's divisions for the last quarter: Division XXX Sales $3,650,000 Operating income
The following information was compiled by the company's accountant for one of the company's divisions for the last quarter:
| Division XXX | |
| Sales | $3,650,000 |
| Operating income | $270,000 |
| Total assets | $2,450,000 |
| Current liabilities | $350,000 |
| Target rate of return | 14% |
| WACC | 12% |
| Tax rate | 30% |
Required (Show all computations):
- Compute the following performance measures: ROI, RI, and EVA and then state whether each of the measures indicates a satisfactory performance or not. (14 marks)
- Assume that the division manager is considering an investment opportunity that would yield $35,000 in annual operating income and cost the division $240,000. Is this a good investment opportunity from the perspective of top management? Why or why not? (4 marks)
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Intermediate Accounting Volume 1
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick
7th Edition
1260306747, 978-1260306743
