The following data are available for two divisions of Solomons Company: The cost
ID: 2397183 • Letter: T
Question
The following data are available for two divisions of Solomons Company:
The cost of capital for the company is 6 percent. Ignore taxes.
Required:
a-1. Calculate the ROI for both North and South divisions. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
b-1. Calculate the EVA for both North and South divisions. (The divisions have no current liabilities.)
North Division South Division Division operating profit $ 6,800,000 $ 31,350,000 Division investment 40,000,000 330,000,000Explanation / Answer
Calculate ROI :
ROI = Operating profit *100/Investment
Calculate EVA :
North division South division ROI 6800000*100/40000000 = 17% 31350000*100/330000000 = 9.5%Related Questions
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