Calculate eva for both subsidiaries note that since no

Reference no: EM13484768

ELN Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. information related to the two subsidiaries follows:

Hazardous Waste Residential Waste

________________________________________________________________________________________________________

Total assets $15,300,000 $87,000,000

Noninterest- bearing current liabilities 3,300,000 13,200,000

Net income 1,870,000 6,600,000

Interest expense 1,375,000 8,030,000

Required rate of return 10% 13%

Tax rate 40% 40%

Required

a.Calculate ROI for both subsidiaries.

b.Calculate EVA for both subsidiaries. Note that since no adjustments for accounting distortions are being made, EVA is equivalent to residual income.

c.Which subsidiary has added the most to shareholder value in the last year?

d.Based on the limited information, which subsidiary is the best candidate for expansion? Explain.

Reference no: EM13484768

Questions Cloud

Why may accounting policies with no direct cash flow : why may accounting policies with no direct cash flow consequences indirectly affect investors or creditors? why may

Over the years the research findings regarding changing : over the years the research findings regarding changing from fifo to lifo have varied. why do you suppose this is the

Calculate the net assessable income of mr ching for the : mr. ching was a prc resident and was employed as a sales manager by wang laboratories limited in hong kong. he gave you

How did a decline in housing prices help trigger the : how did a decline in housing prices help trigger the subprime financial crisis starting in

Calculate eva for both subsidiaries note that since no : eln waste management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of

Why is the choice between the fifo-lifo inventory methods : why is the choice between the fifo-lifo inventory methods an interesting issue in capital market

Forecasters predictions of inflation are notoriously : forecasters predictions of inflation are notoriously inaccurate so their expectations of inflation cannot be rational.

Evaluate the company in terms of roi while income has : consider the following information for mckinley and son

Explain how the separation of ownership and control in : explain how the separation of ownership and control in american corporations might lead to poor

User Account

All Pages