Reference no: EM132663982
Question - Mary's Auto Shop Inc. allows its divisions to operate as autonomous units. Their results for the current year were as follows:
Sport Terrain City
Revenues $1,700,000 $800,000 $6,000,000
Current assets 230,000 40,000 410,000
Capital assets 870,000 660,000 1,590,000
Current liabilities 100,000 100,000 500,000
Net operating income 232,000 42,000 602,000
After-tax income 186,000 34,000 482,000
Weighted average cost of capital 10% 10% 10%
Required - For each division compute (to two decimal) the:
1. Return on sales in %
2. Return on investment (to two decimal) based on total assets employed in %
3. Economic value added
4. Residual income based on net operating income