The Rainy Division of Seattle Corporation reported the following results from the past year. Shareholders require a return of 14%. Management calculated a weighted average cost of capital (WACC) of 5%. Rainy's corporate tax rate is 30%. $900,000 Sales 315,000 1,700,000 700,000 Operating income Total assets Current liabilities What is the division's Residual Income (RI)? O A. $189,000 O B. $77,000 O C. $315,000 O D. $126,000

The Rainy Division of Seattle Corporation reported the following results from the past year. Shareholders require a return of 14%. Management calculated a weighted average cost of capital (WACC) of 5%. Rainy's corporate tax rate is 30%. $900,000 Sales 315,000 1,700,000 700,000 Operating income Total assets Current liabilities What is the division's Residual Income (RI)? O A. $189,000 O B. $77,000 O C. $315,000 O D. $126,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 17E: Consider the data for each of the following four independent companies: Required: 1. Calculate the...

See similar textbooks

Similar questions

During the current year, Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. Using the sales margin from the previous exercise, what is the total ROI for the company during the current year?
Consider the data for each of the following four independent companies: Required: 1. Calculate the missing values in the above table. (Round rates to four significant digits.) 2. Assume that the cost of capital is 9 percent for each of the four firms. Compute the residual income for each of the four firms.
Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of goods sold was 240,000, its operating expenses were 50,000, its interest revenue was 2,000, and its interest expense was 12,000. Brandts income tax rate is 30%. Prepare Brandts multiple-step income statement for the current year.
Juroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Refer to the information for Juroe Company on the previous page. Also, assume that Juroes total assets at the beginning of last year equaled 17,350,000 and that the tax rate applicable to Juroe is 40%. Required: Note: Round answers to two decimal places. 1. Calculate the average total assets. 2. Calculate the return on assets.
The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.
Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands): The income tax rate for Xenold, Inc., is 40 percent. Xenold, Inc., has two sources of financing: bonds paying 5 percent interest, which account for 25 percent of total investment, and equity accounting for the remaining 75 percent of total investment. Xenold, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Xenold stock has an opportunity cost of 5 percent over the 4 percent long-term government bond rate. Xenolds total capital employed is 5.04 million (2,600,000 for the Home Division, 1,700,000 for the Restaurant Division, and the remainder for the Specialty Division). Required: 1. Prepare a segmented income statement for Xenold, Inc., for last year. 2. Calculate Xenolds weighted average cost of capital. (Round to four significant digits.) 3. Calculate EVA for each division and for Xenold, Inc. 4. Comment on the performance of each of the divisions.
Albion Inc. provided the following information for its most recent year of operations. The tax rate is 40%. Required: 1. Compute the following: (a) return on sales, (b) return on assets, (c) return on stockholders equity, (d) earnings per share, (e) price-earnings ratio, (f) dividend yield, and (g) dividend payout ratio. 2. CONCEPTUAL CONNECTION If you were considering purchasing stock in Albion, which of the above ratios would be of most interest to you? Explain.
The following selected data pertain to the Argent Division for last year: Required: 1. How much is the residual income? 2. How much is the return on investment? (Rounded to four significant digits.)
During the current year. Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. What is the sales margin?