56) Assume Division 1 of the XYZ Company had the following results last year.
Sales
|
$5,000,000
|
Operating income
|
1,000,000
|
Total assets (average)
|
10,000,000
|
Current liabilities
|
500,000
|
Management's required rate of return is 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%.What is the division's return on investment?
A) 5%
B) 10%
C) 20%
D) 50%
57) Assume Division 1 of the XYZ Company had the following results last year.
Sales
|
$5,000,000
|
Operating income
|
1,000,000
|
Total assets (average)
|
10,000,000
|
Current liabilities
|
500,000
|
Management's required rate of return is 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%. What is the division's economic value added?
A) $60,000
B) $130,000
C) $270,000
D) $430,000
58) Assume the Apple division of the Gala Company had the following results last year.
Sales
|
$3,000,000
|
Operating income
|
500,000
|
Total assets (average)
|
4,500,000
|
Current liabilities
|
300,000
|
Management's required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%. What is Apple division's return on investment?
A) 11.11%
B) 16.67%
C) 66.67%
D) 60.00%
59) Assume the Apple division of the Gala Company had the following results last year.
Sales
|
$3,000,000
|
Operating income
|
500,000
|
Total assets (average)
|
4,500,000
|
Current liabilities
|
300,000
|
Management's required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%. What is Apple division's EVA?
A) $14,000
B) $14,760
C) $15,535
D) $16,220
60) Which of the following goals of a performance evaluation system is accomplished when the company's actual results are compared to industry standards?
A) Motivation of unit managers
B) Promotion of goal congruence
C) External benchmarking
D) Communicating expectations
61) Huntswell Corporation has two major divisions-Agricultural Products and Industrial Products. Data for the year just finished is as follows:
|
Agriculture Division
|
Industrial Division
|
Sales revenue
|
$140,000
|
$1,040,000
|
Operating income
|
$16,400
|
$220,000
|
Average assets
|
$300,000
|
$5,540,000
|
Target rate of return
|
4.0%
|
4.0%
|
For the Agricultural Division, how much was the ROI?
A) 5.5%
B) 4.5%
C) 3.2%