Business, 05.08.2020 06:01 madisonworthington7
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital of 12 percent. The following financial information is available for October ($ thousands):
Software Division . Consulting Division Venture Capital Division
(Value Base) (Value Base) (Value Base)
Book Current Book Current Book Current
Sales $100,000 $100,000 $200,000 $200,000 $800,000 $800,000
Income 12,250 11,700 16,400 20,020 56,730 51,920
Assets 70,000 90,000 100,000 110,000 610,000 590,000
Liabilities 10,000 10,000 14,000 14,000 40,000 40,000
Required
a. Compute the return on investment using both book and current values for each division. Round answers to three decimal places.
Book Value Current Value
Software Answer ? Answer ?
Consulting Answer ? Answer ?
Venture Capital Answer ? Answer ?
b. Compute the residual income for both book and current values for each division. Use negative signs with answers, when appropriate.
Book Value Current Value
Software $Answer 3,850 $Answer 900
Consulting Answer 4,400 . Answer 6,820
Venture Capital Answer (16,470) Answer (1,880)
c. Compute the economic value added income for both book and current values for each division if the tax rate is 30 percent and the weighted average cost of capital is 10 percent. Use negative signs with answers, when appropriate. Book Value Current Value
Software $Answer ? $Answer ?
Consulting Answer ? Answer ?
Venture Capital Answer ? Answer ?
Answers: 1
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ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital o...
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