Reference no: EM133101107
Question - The Skincare Division at Beauty Corp has the opportunity to invest in the next year on 2 types of projects. The relevant data is
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Project I
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Project II
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Investment outlay
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$88,500
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$43,200
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Sales
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116,600
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56,200
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Operating income
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21,240
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7,992
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In the current year, the division had operating assets of $440,000; sales of $300,000 and operating profit of $88,000. Division managers have been approved for additional funding of up to IDR 150,000. The minimum rate of return is 12%, the weighted average cost of capital is 10% and the tax rate is 25%. There are 4 alternatives that should be considered, namely:
(1) No additional investment
(2) Investment in Project I
(3) Investment in Project II
(4) Investment in both projects
Required -
a. Calculate ROI, RI and EVA for each alternative!
b. Mention and explain the reasons why companies choose to use Decentralization!
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: In the current year, the division had operating assets of $440,000; sales of $300,000 and operating profit of $88,000. Calculate ROI, RI and EVA
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