Truck Rental Transportation Division Division Total assets $11.000.000 $9.500.000 Current liabilities $ 2.200.000 $2.800.000 Operating income $ 825.000 $ 855.000 Required rate of return 12% 12% Data for Requirement 4 Tax rate 40% Long-term debt $9.000.000 Interest rate on LTD 10% Equity capital $6.000.000 Cost of equity 15% 1. Calculate return on investment (ROI) for each division using operating income as a measure of income and total assets as a measure of investment. 2. Calculate residual income (RI) for each division using operating income as a measure of income and total assets minus current liabilities as a measure of investment. 3. William Abraham, the Truck Rental Division manager, argues that the performance parts division has "loaded up on a lot of short-term debt" to boost its RI. Calculate an alternative RI for each division that is not sensitive to the amount of short-term debt taken on by the performance parts division. Comment on the result. 4. This has two sources of funds: long-term debt and equity capital Applying the same weighted-average cost of capital (WACC) to each division, calculate EVA for each division. 5. Use your preceding calculations to comment on the relative performance of each division