SquidGame Inc. presented the following information regarding its two divisions classified as investmentcenters.Jenny DivisionP 300,000Operating IncomeOperating assetsNet salesJohnny DivisionP500,0002,500,0002,750,000375,0001,200,0001,500,000Current Liabilities240,000WACC15%12.5%Current operating asset500,000750,000The corporation is subject to a 35% tax rate. Weighted cost of capital is based on book value of long-term asset. Assuming the imputed interest rate is 18%.Required:1. In using EVA, what is the EVA of the division that is performing better?2. In using Residual Income, what is the residual income of the division that is performing better?

Economic Value Added: The economic value added (EVA) of a firm is based on the residual wealth,…

Answered: SquidGame Inc. presented the following…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 3PA: Macon Mills is a division of Bolin Products. Inc. During the most recent year, Macon had a net...

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Blossom and Telecommunications Corporation has three divisions. The names of these divisions, along with the after-tax cost ofcapital for each division and the market value of the assets in each division, are as follows:Division NameCost of CapitalMV of AssetsInfrastructure development6.45$185,000,000Power5.50$241,000,000Telecommunications6.10$500,000,000EvWhat is the overall after-tax cost of capital for Blossom and Telecommunications? (Round answer to 2 decimal places, e.g. 52.75%.)After-tax cost of capital
The following data relates to the ABC Corporation and its A Division. A Division sales P 8,000,000 A Division operating income P 480,000 A Division total assets P 2,000,000 A Division current liabilities P 600,000 Corporate target rate of return 14% Corporate weighted average cost of capital 10% Corporate effective tax rate 30% What is the A Divisions Economic Value Added (EVA)?
The following data relates to the XYZ Corporation and its X Division. X Division sales P 8,000,000 X Division operating income P 480,000 X Division total assets P 2,000,000 X Division current liabilities P 600,000 Corporate target rate of return 14% Corporate weighted average cost of capital 10% Corporate effective tax rate 30% What is the X Divisions Economic Value Added (EVA)?
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue $630,000 $650,000 $640,000 Operating expenses 340,200 308,000 484,000 Invested assets 2,300,000 1,900,000 1,300,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue $fill in…
The following results are available for Division X and Y:Division X Division YProfit before interest and tax P185 000 P172, 000Capital employed P1, 540, 000 P1, 650, 000The cost of capital is 10%.Calculate and comment on the performance of the departments based on:a. Return on capital employed (4 marks)b. Residual incom
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he condensed balance sheet and income statement data for SymbiosisCorporation are presented below.SYMBIOSIS CORPORATIONBalance SheetsDecember 312014 2013 2012Cash $ 30,000 $ 24,000 $ 20,000Accounts receivable (net) 110,000 48,000 48,000Other current assets 80,000 78,000 62,000Investments 90,000 70,000 50,000Plant and equipment (net) 503,000 400,000 360,000$813,000 $620,000 $540,000 Current liabilities $ 98,000 $ 75,000 $ 70,000Long-term debt 130,000 75,000 65,000Common stock, $10 par 400,000 340,000 300,000Retained earnings 185,000 130,000 105,000$813,000 $620,000 $540,000SYMBIOSIS CORPORATIONIncome StatementsFor the Years Ended December 312014 2013Sales revenue $800,000 $750,000Less: Sales returns and allowances 40,000 50,000Net sales 760,000 700,000Cost of goods sold 420,000 406,000Gross profit 340,000 294,000Operating expenses (including income taxes) 230,000 209,000Net income $110,000 $ 85,000Additional information:1. The market price of Symbiosis common stock was $5.00, $3.50, and…
The Global Products Corporation has three subsidiaries: Medical Supplies Heavy Machinery Electronics Sales.......... $20,040,000 $5,980,000 $4,730,000 Net income 1,700,000 592,000 402,000 (after taxes) Assets............8,340,000 8,760,000 3,570,000 a. Which division has the lowest return on sales? b. Which division has the highest return on assets? c. Compute the return on assets for the entire corporation. d. If the $8,760,000 investment in the heavy machinery division is sold off and redeployed in the medical supplies subsidiary at the same rate of return on assets currently achieved in the medical supplies division, what will be the new return on assets for the entire corporation?

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