Answer Happy

Problem 5 (12 points): You are a major division manager for Collins Cutler, Inc. and it is about time for your annual performance appraisal. You know that your supervisor evaluates you based on several metrics, including return on investment, residual income, and economic value-added. You have your division's final numbers in for the year and are curious to see how you did. Here is some information from your division's year-end statements: Operating income: $500,000 Total assets: $1,000,000 Long-term assets: $750,000 Division market value of debt: $600,000 Current assets: $250.000 Current liabilities: $150,000 Tax rate: 30% Total sales revenue: $900,000 Accounts receivable: $200,000 Legacy costs: $225,000 Company required rate of return: 15% Division market value of equity: $300,000 Shareholder return expectations: 10% Interest rate on debt: 13% 1. What is your division's return on investment (1 points)? 2. What is your division's profit margin (1 points)? 3. What is your division's capital turnover (1 points)? 4. What is your division's residual income (1 points)? 5. What is your division's weighted average cost of capital (5 points)? 6. What is your division's economic value-added (3 points)?