Reference no: EM132516949
The Tandem division of Great Adventures Cycle Company had the following results last year (in thousands):
Sales $6,000,000
Operating Income $280,000
Total Assets ? ? ?
Current Liabilities $500,000
- Management's target rate of return is 8% and the weighted average cost of capital is 6%. Tandem's effective tax rate is 30%.
Question 1: If Tandem's Asset Turnover = 4.0, what is the company's Return on Investment?
A. Tandem's ROI is: 8.00%
B. Tandem's ROI is: 4.67%
C. ROI cannot be calculated with the given information.
D. Tandem's ROI is: 14.00%
E. Tandem's ROI is: 18.67%
Question 2: The following information relates to the Miracle Corporation and its Toy Division:
Toy Division Sales $8,000,000
Toy Division Operating Income ? ? ?
Toy Division Total Assets $3,000,000
Toy Division Current Liabilities $750,000
Corporate rate of return target 12%
Corporate weighted average cost of capital 8%
Corporate effective tax rate 25%
Residual Income $120,000
Based on the above information, what is the Toy Division's Economic Value added?
A. The Toy Division's Economic Value Added (EVA) is $180,000.
B. EVA cannot be calculated with the given information.
C. The Toy Division's Economic Value Added (EVA) is $ 90,000.
D. The Toy Division's Economic Value Added (EVA) is $240,000.
E. The Toy Division's Economic Value Added (EVA) is $120,000.