ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital...
ROI, Residual Income, and EVA with Different
Bases
Envision Company has a target return on capital of 12 percent. The
following financial information is available for October ($
thousands):
| Software Division | Consulting Division | Venture Capital Division | ||||
|---|---|---|---|---|---|---|
| (Value Base) | (Value Base) | (Value Base) | ||||
| Book | Current | Book | Current | Book | Current | |
| Sales | $110,000 | $110,000 | $210,000 | $210,000 | $810,000 | $810,000 |
| Income | 13,750 | 13,200 | 17,900 | 21,520 | 58,230 | 53,420 |
| Assets | 70,000 | 90,000 | 100,000 | 110,000 | 610,000 | 590,000 |
| Liabilities | 10,000 | 10,000 | 14,000 | 14,000 | 40,000 | 40,000 |
Required
a. Compute the return on investment using both book and current
values for each division.
Round answers to three decimal places.
| Book Value | Current Value | |
|---|---|---|
| Software | Answer | Answer |
| Consulting | Answer | Answer |
| Venture Capital | Answer | Answer |
b. Compute the residual income for both book and current values
for each division.
Use negative signs with answers, when appropriate.
| Book Value | Current Value | |
|---|---|---|
| Software | $Answer | $Answer |
| Consulting | Answer | Answer |
| Venture Capital | Answer | Answer |
c. Compute the economic value added income for both book and current values for each division if the tax rate is 30 percent and the weighted average cost of capital is 10 percent.
Use negative signs with answers, when appropriate.
| Book Value | Current Value | |
|---|---|---|
| Software | $Answer | $Answer |
| Consulting | Answer | Answer |
| Venture Capital | Answer | Answer |
Homework Answers
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ROI, Residual Income, and EVA with Different
Bases
Envision Company has a target return on capital...
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital...
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital of 12 percent. The following financial information is available for October ($ thousands): Software Division Consulting Division Venture Capital Division (Value Base) (Value Base) (Value Base) Book Current Book Current Book Current Sales $110,000 $110,000 $210,000 $210,000 $810,000 $810,000 Income 13,750 13,200 17,900 21,520 58,230 53,420 Assets 70,000 90,000 100,000 110,000 610,000 590,000 Liabilities 10,000 10,000 14,000 14,000 40,000 40,000 Required a. Compute the...
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital...
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Calculate the following ratios for 2018 and 2019. Since 2017
numbers are not presented, do not use averages when calculating the
ratios for 2018. Instead, use the number presented on the 2018
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2019 2018 $420,000 16,000 436,000 $350,000 10,000 360,000 252,000 42,000 22,000 6,000 42,000 364,000 $ 72,000 206,000 38,000 20,000 6,000 36,000 306,000 $ 54,000 Revenues Net sales Other revenues Total revenues Expenses Cost of goods sold Selling expenses...
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