Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

whats the answer How much new operating income would each division need to generate in the four th quarter to reach a positive Rl by

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
whats the answer
How much new operating income would each division need to generate in the four th quarter to reach a positive Rl by year-end? Assume again that each division purchases a $48,000 nondepreciable asset that is still included in operating assets. It is the end of the third quarter, and Patricia is evaluating the performance of two key divisions in the company. Both divisions had $48,000 cash available for investment in the fourth quarter, so Patricia is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 8%, while its weighted average cost of capital is 8%. Its effective tax rate is 25% Your answer is correct. Calculate the current ROI, RI, and EVA for each division through the third quarter. For ROI purposes, operating assets are considered investments. (Enter ROl as a decimal, not as a percentage. Round ROI to 4 decimal places, eg. 0.1526 . Enter negative omounts with either a-signeg. 15,000 or in porenthesis eg. (15,000j) How much would each division need to generate in new operating income in the fourth quarter to reach the company's desired ROI of 12% at year end, assuming each division uses its available $48,000 to purchase a new investment? Assume it is a $48,000 nondepreciable asset but still included in operating assets

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Venture Capital And The Corporate Governance Of Chinese Listed Companies

Authors: Lin Zhang

1st Edition

1461412803,1461412811

More Books

Students also viewed these Finance questions

Question

=+During a downturn?

Answered: 1 week ago