Question

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 the division's Residual Income (RI)?

d. what is the division's Economic Value Added (EVA)?

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