Reference no: EM133119056
Questions -
Q1. Downtown Ltd makes taps. It has a weighted-average cost of capital of 14% and total assets of $3917,000. Downtown Ltd has current liabilities of $680,000. Its operating profit for the year was $843,000. Downtown Ltd does not have to pay any income taxes. One of the expenses for accounting purposes was a $217,000 advertising campaign. The entire amount was expensed this year, although Downtown's CEO believes the beneficial effects of this advertising will last 5 years. How much more profits that EVA measure brings compared to RI measure?
Q2. The Basketball Division of RealSports manufactures and sells basketballs. Assume production equals sales. Budgeted data for 2014 are:
Current assets $433,000
Non-current assets $464,000
Total assets 897,000
Production output 213395 basketballs
Target ROI (Operating profit/ Total assets) 13%
Fixed costs $544,000
Variable cost $4 per basketball
Enter the amount of the minimum selling price per basketball necessary to achieve the target ROI of 13%
Q3. The Basketball Division of RealSports manufactures and sells basketballs. Assume production equals sales. Budgeted data for 2014 are:
Current assets $290,000
Non-current assets $772,000
Total assets 1062,000
Production output 190098 basketballs
Target ROI (Operating profit/ Total assets) 9%
Fixed costs $819,000
Variable cost $5 per basketball
Enter the amount of RI of the Basketball Division for 2014 assuming RealSports uses a required rate of return of 5% on total division asset when calculating division RI
Q4. The following financial data are for the evaluation of performance for Sandy Point Construction:
Average operating assets $526,000
Net operating income $71,000
Minimum required rate of return 9%
The manager of Sandy Point Construction is considering a new project. She can buy or lease equipment that will reprocess tailings from old mines to remove any traces of gold left behind by the original separating processes. The purchase price of the equipment is $177,000. The cost to lease is $4,000 per month. She estimates the return (incremental revenues minus incremental expenses, including lease cost) to be $47,000 per year. She knows that purchasing the equipment will increase the value of average operating assets. If she leases the equipment, expenses will increase, but not assets. (In other words, the lease will be accounted for as an operating lease.) Compute the maximum ROI among the purchase and lease option.
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Annual review of acme pension plan
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How much more profits that eva measure
: Downtown Ltd makes taps. It has a weighted-average cost of capital of 14% and total assets of $3917,000. How much more profits that EVA measure
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How much did you initially deposit
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Level of measurement
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