ROI, Residual Income, and EVA with Different
Bases
Envision Company has a target return on capital of 12 percent. The
following financial information is available for October ($
thousands):
Software Division | Consulting Division | Venture Capital Division | ||||
---|---|---|---|---|---|---|
(Value Base) | (Value Base) | (Value Base) | ||||
Book | Current | Book | Current | Book | Current | |
Sales | $110,000 | $110,000 | $210,000 | $210,000 | $810,000 | $810,000 |
Income | 13,750 | 13,200 | 17,900 | 21,520 | 58,230 | 53,420 |
Assets | 70,000 | 90,000 | 100,000 | 110,000 | 610,000 | 590,000 |
Liabilities | 10,000 | 10,000 | 14,000 | 14,000 | 40,000 | 40,000 |
Required
a. Compute the return on investment using both book and current
values for each division.
Round answers to three decimal places.
Book Value | Current Value | |
---|---|---|
Software | Answer | Answer |
Consulting | Answer | Answer |
Venture Capital | Answer | Answer |
b. Compute the residual income for both book and current values
for each division.
Use negative signs with answers, when appropriate.
Book Value | Current Value | |
---|---|---|
Software | $Answer | $Answer |
Consulting | Answer | Answer |
Venture Capital | Answer | Answer |
c. Compute the economic value added income for both book and current values for each division if the tax rate is 30 percent and the weighted average cost of capital is 10 percent.
Use negative signs with answers, when appropriate.
Book Value | Current Value | |
---|---|---|
Software | $Answer | $Answer |
Consulting | Answer | Answer |
Venture Capital | Answer | Answer |
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital...
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital of 12 percent. The following financial information is available for October ($ thousands): Software Division Consulting Division Venture Capital Division (Value Base) (Value Base) (Value Base) Current Book Current Book Current $120,000 $120,000 $220,000 $220,000 $820,000 $820,000 Income 14,750 14,200 18,900 22,520 59,230 54,420 70,000 90,000 100,000 110,000 610,000 590,000 Liabilities 10,000 10,000 14,000 14,000 40,000 40,000 Book Sales Assets 0.092 Required a. Compute...
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Question 1: Return on investment (ROI), residual income (RI) Generic Motors Corporation has two divisions. Division A Division B Investment (operating assets) | $400,000 $1,600,000 Profit $72,000 $224,000 The required rate of return (cost of capital) is 10% a year. a) Compute return on investment (ROI) for each division. ROI for A = % (if your answer is 9.5%, enter 9.5 without the percent sign) ROI for B = % b) Compute the residual income (RI) for each division. RI...
Margin, Turnover, ROI Required: 1. Consider the data for each of the following four independent companies. Calculate the missing values in the table below. For margin and ROI, enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent. For turnover, enter your answer as a decimal value rounded to two decimal places. A B C D Revenue $10,000 $47,000 $96,000 $ Expenses $8,000 $ $90,240 $ Operating income...
Margin, Turnover, ROI Required: 1. Consider the data for each of the following four independent companies. Calculate the missing values in the table below. For margin and ROI, enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent. For turnover, enter your answer as a decimal value rounded to two decimal places. A B C D Revenue $10,000 $49,000 $96,000 $ Expenses $8,000 $ $90,240 $ Operating income...
Margin, Turnover, ROI Required: 1. Consider the data for each of the following four independent companies. Calculate the missing values in the table below. For margin and ROI, enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as 3,83" percent. For turnover, enter your answer as a decimal value rounded to two decimal places Revenue $10,000 $48,000 $96,000 19.000 Expenses $8,000 $ 36,000 $90,240 17,860 Operating income $2,000 $12,000 $...
Division from last year. The Controller has asked you to compute the ROI and Residual Income based on data from last year and if the division adds a new product line. Use the Information Included in the Excel Simulation and the Excel functions described below to complete the task. . Cell Reference: Allows you to refer to data from another cell in the worksheet. From the Excel Simulation below. If in a blank cell. "=G5" was entered, the formula would...
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