Sapsora Company uses ROI to measure the performance of its operating divisions and to reward...
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Sapsora Company uses ROI to measure the performance of its operating divisions and to reward division managers. A summary of the annual reports from two divisions is shown as follows. The companys weighted-average cost of capital is 12 percent. Division A Division B Total assets $ 6,000,000 $ 8,750,000 Current liabilities $ 500,000 $ 1,750,000 After-tax operating income $ 1,000,000 $ 1,180,000 ROI 25 % 14 %
a. Which division is more profitable in absolute dollars? Division A
b. Compute the EVA for Division A and Division B. A= 340,000 and B= 340,00
c. Suppose the manager of Division A was offered a one-year project that would increase his investment base by $250,000 and show a profit of $37,500. Would the manager be motivated to invest in the new project? Yes
I only received partial credit for this question so I answered something worng can you please walk through a-c with the correct answers?
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