Reference no: EM13939622
RETURN ON INVESTMENT AND ECONOMIC VALUE ADDED CALCULATIONS WITH VARYING ASSUMPTIONS
Knitpix Products is a division of Parker Textiles Inc. During the coming year, it expects to earn income of $310,000 based on sales of $3.45 million; without any new invest- ments, the division will have average operating assets of $3 million. The division is considering a capital investment project-adding knitting machines to produce gaiters- that requires an additional investment of $600,000 and increases net income by $57,500 (sales would increase by $575,000). If made, the investment would increase be- ginning operating assets by $600,000 and ending operating assets by $400,000. Assume that the actual cost of capital for the company is 7 percent.
Required:
1. Compute the ROI for the division without the investment.
2. Compute the margin and turnover ratios without the investment. Show that the product of the margin and turnover ratios equals the ROI computed in Requirement 1.
3. Compute the ROI for the division with the new investment. Do you think the division manager will approve the investment?
4. Compute the margin and turnover ratios for the division with the new investment. Compare these with the old ratios.
5. Compute the EVA of the division with and without the investment. Should the manager decide to make the knitting machine investment?
|
Describe the strategic planning process
: Briefly describe the strategic planning process and how you would use this to promote the aims and outcomes of the program.
|
|
Problem regarding the center-line vaporization
: A string of negligible diameter is drawn down the center-line of a pipe containing a Newtonian fluid. At what velocity, w, must the string be drawn in order to vaporize the fluid? Pose the problem in a general fashion but make whatever reasonable ..
|
|
How would it affect urine ph and why would this change occur
: While visiting your family, you come down with a severe case of stomach flu. You begin vomiting and continue vomiting for more than a day, unable to keep any food or fluids down. How would you expect your condition to affect your blood pH and why ..
|
|
Function that returns the maximum value of the array
: Arrays are collections of elements of the same type. The elements of the array can be accessed using their position (index) in the array.
|
|
Compute the roi for the division without the investment
: Compute the ROI for the division without the investment. Compute the ROI for the division with the new investment. Do you think the division manager will approve the investment?
|
|
Challenges that health care leaders are faced
: Critically discuss some of the challenges that health care leaders are faced with in terms of decision making within the team environment. Explore this specifically in relation to to the aged care sector and disability health services.
|
|
What is the expected return of gell stock
: Suppose Blek stock has a beta of 1.7, whereas Gell stock has a beta of 0.96. If the risk free interest rate is 4.2% and the expected return of the market portfolio is 13.4%, according to the CAPM, What is the expected return of Blek stock? What is th..
|
|
How can she make antiserum specific for rabbit igg
: Suppose a scientist wants to make antiserum specific for IgG. They inject a RABBIT with purified MOUSE IgG and get an antiserum thats reacts with MOUSE IgG and other mouse isotopes. Why did this happen? How can she make antiserum specific for RABB..
|
|
Market risk premium-reward-to-risk ratios for stocks
: Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of .8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk ratios for stocks Y ..
|