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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.
Use your estimated growth rate to solve for the required rate of return using the dividend discount model.
you have just hired as a new management trainee by earrings unlimited a distributor of earrings to different retail
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Draw document flowchart for the accounts payable procedures described above. Note: use same-page connector where it is appropriate.
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But isn’t that a pretty rosy estimate of these assets’ actual life? Trade publications show an average depreciation period of 12 years. How would increasing depreciation period affect American Movieplex’s income?
In Saint-Simon, Inc., the Assembly Department started 12,000 units and completed 14,000 units. If beginning work in process was 6,000 units, how many units are in ending work in process?
BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. Illustrate what is the nature of the book-tax difference created by the net operating loss deduction in the current year?
your friend comments i just ignore the income statement when im making an investment decision. all i care about is the
Block Company issued a 20,000 10 year bond on 7/1/2008 when the market rate was 6.5%. Assume that the accounting year of Block Company ends on December. Journalize the following transactions.
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