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Performance Auto Company operates a New Car Division(that sells high performance sports cars) and a Performance parts division(that sells performance improvement parts for family cars). Some division financial measures for 2008 are as follows:
1. Calculate return on investment(ROI) for each division using operating income as a measure of income and total assets as a measure of investment.
2. Calculate residual income(RI) for each division using operating income as a measure of income and total assets minus current liabilities as ameasure of investment. 3. William Abraham, the New car division manager, argues that the performance parts division has "loaded up on a lot of short term debt" to boost its RI. Calculate an alternative RI for each division that is not sensitive to the amount of short term debt taken on by the Performance parts division. Comment on the result. 4. Performance auto Company, whoe tax rate is 40% has two sources of funds:long term debt with a market value of $18,000,000 at an interest rate of 10% and equity capital with a market value of $12,000,000 and a cost equity of 15%. Applying the same weighted average cost of capital (WACC) to each division, calculate EVA fpor each division. 5. Use the preceding calculations to comment on the relative performance of each division.
Evaluate each method in terms of its effect on cash flows, fixed asset turnover, and earnings per share. Assuming that the company is most interested in maintaining a high EPS during year
Describe how the analysis is to be performed and show all computations needed to arrive at the correct answer.
Gardner Corporation purchased a truck at the beginning of 2012 for $90,000. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 18,000 miles in 2012 and 32,000 miles in 2013. What is the depr..
What should company report as its deferred income tax liability as of the end of its first year of operations.
Prepare the slides and notes for your presentation the format below. Your presentation should be limited to a maximum of five slides.
Typically the interest rate on the fixed-rate mortgage is higher. Having learned the five core principles, does this make sense?
aunt ethels fancy cookie company manufactures and sells three flavors of cookies macaroon sugar and buttercream. the
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Prepare the journal entry for Sanchez Company to write off the Maximillan receivable. Illustrate what is the net realizable value of Sanchez Company’s accounts receivable before the write-off of the Maximillan receivable?
Should Tan use the new material? Show your calculations and what nonfinancial and qualitative factors should Tan consider in making the descision.
the specific purposes of this project arenbsp1. apply to actual companies the basic knowledge and analytical techniques
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