Question

Toy Co Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. Information related to the two subsidiaries follows:

	Hazardous Waste	Residential Waste
Total assets	$15,270,400	$86,516,000
Noninterest-bearing current liabilities	3,319,000	13,280,100
Net income	1,963,400	6,602,900
Interest expense	1,449,200	8,051,400
Required rate of return	10%	13%
Tax rate	40%	40%

Calculate ROI for both subsidiaries. (Round answers to 2 decimal places, e.g. 15.32%.)

	Hazardous Waste	Residential Waste
ROI	?%	?%

Calculate EVA for both subsidiaries. Note that since no adjustments for accounting distortions are being made, EVA is equivalent to residual income. (Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)

	Hazardous Waste	Residential Waste
EVA	?$	?$

Which subsidiary has added the most to shareholder value in the last year?
-Hazardous Waste or Residential Waste has added the most to shareholder value.

Based on the limited information, which subsidiary is the best candidate for expansion?
-Hazardous Waste or Residential Waste is the best candidate for expansion.

Answer 1