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Calculate the return on investment for both divisions

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Reference no: EM131702532

Question - For this assignment, you will be calculating return on investment, margin, turnover, residual income, and economic value added ratios for two divisions of the same company.

Directions: Complete the following calculations in an Excel file. Be sure to show and label your work for full credit.

A company has two divisions with the following information:

Division 1Sales:2,000,000Operating Income:400,000Assets Jan. 1:4,000,000Assets Dec. 31:4,500,000

Division 2Sales:1,000,000Operating Income:300,000Assets Jan. 1:2,000,000Assets Dec. 31:2,200,000

The Minimum required rate of return for the company for all of its divisions is 30% and its cost of capital is 15%. The company has an income tax rate of 40%. Calculate the following ratios for both divisions:

1. Return on Investment

2. Margin

3. Turnover

4. Residual income

5. Economic Value Added

Reference no: EM131702532

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