Reference no: EM133051987
Questions -
Q1. The Avila Division of Maldonado Company had operating income last year of $112,300 and average operating assets of $760,000. Maldonado's minimum acceptable rate of return is 10%.
Required - 1. Calculate the residual income for the Avila Division.
2. Was the ROI for the Avila Division greater than, less than, or equal to 10%?
Q2. Falconer Company had net (after-tax) income last year of $14,355,464 and total capital employed of $128,517,100. Falconer's actual cost of capital was 9%.
Required - 1. Calculate the EVA for Falconer Company. Enter negative values as negative numbers, if required.
2. Conceptual Connection: Is Falconer creating or destroying wealth?
Q3. Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results:
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Adams Division
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Jefferson Division
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Net (after-tax) income
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$647,350
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$315,000
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Total capital employed
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4,200,000
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3,737,500
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In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 7%.
Required - 1. Calculate the residual income for the Adams Division.
2. Calculate the residual income for the Jefferson Division.