Suppose each division is assessed a capital charge based on

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ROI and Economic Profit Calculations                                                        


  

X

  
  

Y

  
  

Z

  
  

invested capital

  
  

$1,050,000

  
  

$_______

  
  

$1,200,000

  
  

income

  
  

$________

  
  

$142,800

  
  

$210,000

  
  

revenue

  
  

$2,310,000

  
  

$2,856,000

  
  

$_______

  
  

return on sales

  
  

3.00%

  
  

________%

  
  

_________%

  
  

capital turnover

  
  

_________

  
  

________

  
  

3.5

  
  

rate of return o invested capital

  
  

_________%

  
  

10.50%

  
  

__________%

  

1.Prepare a similar tabular presentation, filling in all blanks.

2.Suppose each division is assessed a capital charge based on a cost of capital of 10% of invested capital. Compute the economic profit for each division.

3.Which division is the best performer? Explain.

Reference no: EM13484015

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