Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division...
Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown as follows. The company’s weighted-average cost of capital is 10 percent. Compute the EVA for Division A and Division B.
| Division A | Division B | ||||||
| Total assets | $ | 6,140,000 | $ | 8,610,000 | |||
| Current liabilities | $ | 600,000 | $ | 1,800,000 | |||
| After-tax operating income | $ | 1,040,000 | $ | 1,167,000 | |||
| ROI | 24 | % | 13 | % | |||
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Sapsora Company uses ROI to measure the performance of its
operating divisions and to reward division...
Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division...
Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown as follows. The company’s weighted-average cost of capital is 11 percent. Division A Division B Total assets $ 6,100,000 $ 8,650,000 Current liabilities $ 550,000 $ 1,800,000 After-tax operating income $ 1,020,000 $ 1,163,000 ROI 24 % 14 % a. Which division is more profitable in absolute dollars? b. Compute the EVA...
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information for the month of May:
Division 1: sales, $120,000; operating income, $36,000; operating
assets, $300,000.
Division 2: sales, $80,000; operating income, $40,000; operating
assets, $400,000.
ABC Company expects a minimum return of 10% should be earned from
all investments.
Required:
a. Prepare ABC Company’s ROI analysis using the DuPont
model for each division. (Round Turnover rate answers to
one decimal place.)
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