Homework Answers
a. ROI = Income/investment *100 => 400,000/4,000,000*100 = 10%
b. EVA = (actual return% - expected retun%)*investment => (10% - 8%)*4,000,000 = 80,000$
c. ROI after considering investment => (400,000+36000)/(4,000,000+400,000) => 9.9%
EVA = (9.9% - 8%)*4,400,000 = 83,600 $. SInce EVA goes higher though ROI slightly falls below, we recommend to accept this proposal.
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