#19
Assume the Hiking Shoes division of the All About Shoes
Corporation had the following results...
#19
Assume the Hiking Shoes division of the All About Shoes
Corporation had the following results last year (in thousands).
Management's target rate of return is
15%
and the weighted average cost of capital is
25%.
Its effective tax rate is
25%.
Sales
$ $9,000,000
Operating income
3,150,000
Total assets
3,000,000
Current liabilities
850,000
What is the division's sales margin?
Assume that the financial statements for Division 1 of the ABC
Comapny showed the following for...
Assume that the financial statements for Division 1 of the ABC
Comapny showed the following for last year and at the last year end
(in thousands).
Sales: $10,000,000
Operating income 3,000,000
Total assets 20,000,000
Current Liabilities 2,000,000
Management'srequired rate of return is 10%
The Company's average weighted cost of capital is $17
The Company's effective income tax rate is 30%
Questions:
a. what is the division's profit margin?
b. what is the division Return on Investment (ROI)?
c. what is...
. Performance Evaluation Methods
Ebel Wares is a division of a major corporation. The following
data...
. Performance Evaluation Methods
Ebel Wares is a division of a major corporation. The following
data are for the latest year of
operations:
Sales................................................................................
$29,120,000
Net operating
income.....................................................
$1,514,240
Average operating
assets................................................
$8,000,000
The company’s minimum required rate of return..........
18%
Required:
a. What is the
division's margin?
b. What is the division's
turnover?
c. What is the
division's return on investment (ROI)?
d. What is the division's
residual income?
C. Performance Evaluation Methods
The Clipper Corporation had net operating income of $380,000...
Handle Fabrication is a division of a major corporation. Last the
division had total salos of...
Handle Fabrication is a division of a major corporation. Last the
division had total salos of $23,658,000, net operating income and
average operating assets of $8,000,000. The company's minimum
required rate of return is 8%. 1. The division manager wants to
invest in additional delivery trucks in an to increase returns. The
trucks would cost $800,000The manager estimates that the additional
trucks will increase distribution and therefore increase operating
income by $58,000. What would the division's on investment after
making...
Financial data for Guyer Corporation, for last year follow:
Guyer Corporation
Balance Sheet
Beginning
Balance
Ending...
Financial data for Guyer Corporation, for last year follow:
Guyer Corporation
Balance Sheet
Beginning
Balance
Ending
Balance
Assets
Cash
$
140,000
$
120,000
Accounts receivable
450,000
530,000
Inventory
320,000
380,000
Plant and equipment, net
680,000
680,000
Investment in ABC, Inc.
250,000
280,000
Land (undeveloped)
180,000
170,000
Total assets
$
2,020,000
$
2,160,000
Liabilities and Stockholders'
Equity
Accounts payable
$
360,000
$
310,000
Long-term debt
1,500,000
1,500,000
Stockholders' equity
160,000
350,000
Total liabilities and stockholders' equity
$
2,020,000
$
2,160,000
Guyer...
The American Girl is a division of the Petty Company. Last year
the division had sales...
The American Girl is a division of the Petty Company. Last year
the division had sales of $21,520,000, average operating assets of
$8,000,000 and net operating income of $538,000. The company’s
minimum required rate of return is 18%. Which of the following
statements is true.
1)
Based on ROI, the manager is performing acceptable.
2)
Based on Residual Income, the manager is performing
acceptable.
3)
The manager is performing unacceptable based on ROI and
Residual Income.
4)
None of the...
Bridgeport, Inc., reported the following results for last
year.
Liles Division Marston Division Outland Division
Net...
Bridgeport, Inc., reported the following results for last
year.
Liles Division Marston Division Outland Division
Net operating income $127,000 $55,200 $243,000
Sales revenue 600,000 150,000 1,200,000
Average operating assets 1,040,000 300,000 1,518,000
(a) Calculate margin for each division. (Round answers to 1 decimal
place, e.g. 5.1%.)
Margin
Liles %
Marston %
Outland %
Which division generates the highest margin?
Outland
Liles
Marston
(b) Calculate ROI for each division. (Round answers to 1 decimal
place, e.g. 5.1%.)
Return on Investment
Liles...
Financial data for Skylar and banks Corporation, for last year
follow:
Skylar and banks Corporation
Balance...
Financial data for Skylar and banks Corporation, for last year
follow:
Skylar and banks Corporation
Balance Sheet
Beginning
Balance
Ending
Balance
Assets
Cash
$
140,000
$
120,000
Accounts receivable
450,000
530,000
Inventory
320,000
380,000
Plant and equipment, net
680,000
640,000
Investment in ABC, Inc.
250,000
280,000
Land (undeveloped)
180,000
170,000
Total assets
$
2,020,000
$
2,120,000
Liabilities and Stockholders' Equity
Accounts payable
$
360,000
$
310,000
Long-term debt
1,500,000
1,500,000
Stockholders' equity
160,000
310,000
Total liabilities and stockholders' equity
$...
The Scarf division of Wintertime Inc. reported the following
results from last year’s operations:
Sales
$1,000,000...
The Scarf division of Wintertime Inc. reported the following
results from last year’s operations:
Sales
$1,000,000
Variable expenses
700,000
Contribution margin
300,000
Fixed
expenses
200,000
Net operating income
$100,000
Average operating assets
$1,000,000
At the beginning of the year the Scarf division had a $200,000
investment opportunity with the following characteristics:
Sales
$300,000
Contribution margin ratio
40%
of sales
Fixed expenses
$60,000
If the division pursues the investment opportunity and otherwise
performs the same as last year, the combined (new)...
Westerville Company
reported the following results from last year’s operations:
Sales
$
1,500,000
Variable
expenses
500,000...
Westerville Company
reported the following results from last year’s operations:
Sales
$
1,500,000
Variable
expenses
500,000
Contribution
margin
1,000,000
Fixed
expenses
700,000
Net operating
income
$
300,000
Average
operating assets
$
1,000,000
At the beginning of
this year, the company has a $200,000 investment opportunity with
the following cost and revenue characteristics:
Sales
$
300,000
Contribution
margin ratio
60
% of sales
Fixed
expenses
$
132,000
The company’s minimum
required rate of return is 10%.
13. If the company
pursues...