Compute a division of a company residual income

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Reference no: EM132705119

Problem 1: Compute a division of a company's a) residual income, and b) ROI, with these data for its operations:

Sales 800,000

Operating expenses 650,000

Interest expense 50,000

Tax expense 30,000

Shareholders' equity 200,000

Average operating assets 600,000

Minimum required rate of return 12%

Problem 2: Compute the company's a) WACC, b) total cost of capital, and c) EVA with these data:

After-tax operating income 250,000

Total capital employed 1,060,000

Long-term debt, 9% interest 100,000

Owner's equity 900,000

Average cost of common equity 12%

Tax rate 35%

Reference no: EM132705119

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