Problem 10-29 Your answer is partially correct. Try again. Bramble Corporation o

Question

Problem 10-29 Your answer is partially correct. Try again. Bramble Corporation operates three divisions-Archer, Barrett, and Corvell. Division managers are eveluated besed on the division's return on investment, and historically, the Corvell division has consistently outperformed the other two divisions. Bramble's senior management team has recently discovered that the Corvell Division manager has chosen not to invest in projects that would have been beneficial to the organization as a whole, and they are concerned that the current practice of evaluating the division managers' performance using return on investment may have contributed to these decisions. Therefore, the senior management team is considering the use of residual income or EVA to evaluste the divieion managers' performance. The following data is taken from the most recent year of operations Corvell Assets Current liabilities Operating income Minimum rate of return Weighted average cost of capital Tax rate $29,947,000 S19,936,000 $7,994,800 757,400 325,200 4,192,580 3,399,120 1,599,960 14% 8% 30% 2,254,300 8% 30% 30% Calculate the return on investment, residual income, and EVA for each div sion preceding the number, e.g.-5,125 or parentheses, e.g. (5,125).) Round R01 answers to 0 deci al places, e g. 15% and all other ans vers to 0 decima places e 5,215. If the amount is negative then enter with a negative sign Return on Investment 15 18 Residual Income EVA Archer Click if you would like to Show Work for this questioni Open Show Work LINK TO TEXT LINK TO TEXT LINK TO VIDEO LINK TO VIDEO

Explanation / Answer

1. Return on investment = operating income / net assets *100

3389120 / (19936000 - 757400) *100

2. residual income = operating income - required rate of return * net assets

3. economic value added = operating income net of tax - weighted avg cost of capital *net assets

4192580(1-30%) - .08*27692700

=2934806 - 2215416

3389120 (1-30%) - .08*19178600

=2372384 - 1534288

1598960(1-30%) - .08*7669600

=1119272 - 613568

archer 4192580 / (29947000 - 2254300) *100 15% barrelt

3389120 / (19936000 - 757400) *100

18% carvelll 1598960 / (7994800 - 325200) *100 20%

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