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1.
The
2.
The residual income for each division operating income as a measure of income and total assets minus current liabilities as a measure of investment.
3.
The alternate residual income to each division that is not sensitive to the amount of short-term debt taken on by the PP division.
4.
The economic value added for each division.
Given information:
For 2014,
The tax rate is 40%.
The market value of long-term debt is $18,000,000.
The interest rate for debt is 10%.
The equity capital with market value is $12,000,000.
The
The after-tax cost of debt financing is 6%
The after-tax cost of equity financing is 15%.
5.
To explain: The relative performance of each division.
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Chapter 23 Solutions
Cost Accounting: A Managerial Emphasis, 15th Edition
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
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