Cajun Navy Boats, Inc. had the following financial information for 2018: Sales $756,000 Cost of Goods...
Cajun Navy Boats, Inc. had the following financial information for 2018: Sales $756,000 Cost of Goods Sold $315,000 Operating Expenses $252,000 Operating Earnings $189,000 After-tax Operating Earnings $142,000 Current Liabilities $320,000 Minimum Acceptable Return 12% Average Cost of Capital 8% Average Invested Capital $1,890,000 Calculate the following items, showing your work: Return on Investment Capital Turnover Residual Income Economic Value Added
Homework Answers
a)Return on investment = After-tax Operating Earnings / Average Invested Capital
= 142000 / 1890000
= .0751 or 7.51%
b)Capital turnover = Net sales /Average Invested Capital
= 756000/1890000
= .40
c)Residual income = After-tax Operating Earnings - (Minimum Acceptable Return *Asset invested)
= 142000- (.12*1890000)
= 142000 - 226800
= - 84800
d)Economic value added= After tax operating income -[weighted average cost of capital*(Total asset -current liabilities)]
= 142000 - [.08*(1890000-320000)]
=142000 -[.08*1570000]
= 142000- 125600
= 16400
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Cajun Navy Boats, Inc. had the following financial information
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