SquidGame Inc. presented the following information regarding its two divisions classified as investmentcenters.Operating IncomeOperating assetsNet salesJenny DivisionP 300,000Johnny DivisionP500,0002,500,0001,200,0001,500,000240,0002,750,000Current Liabilities375,000WACC15%12.5%Current operating asset500,000750,000The corporation is subject to a 35% tax rate. Weighted cost of capital is based on book value of long-term asset. Assuming the imputed interest rate is 18%.Required:1. In using ROI, what is the ROI of the division that is performing better?2. In using EVA, what is the EVA of the division that is performing better?

ROI in long terms stands for Rate of Interest. Basically ROI is charged on a amount which can be…

Answered: SquidGame Inc. presented the following…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter12: Valuation: Cash-flow Based Approaches

Section: Chapter Questions

Problem 2BIC

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XYZ Inc. presented the following info regarding its two divisions classified as investment B Division Operating Income Operating assets A Division 300,000 1,200,000 500,000 2,500,000 2,750,0000 375,000 Net Sales 1,500,000 240,000 Current Liabilities WACC 15% 12.5% Current Operating Asset 500,000 750,0000 The corporation is subject to 35% tax rate. Weighted cost of capital is Based on book value of long-term asset. Assuming the imputed interest rate is 18%. REQUIREMENTS: 1. In using EVA, what is the EVA of the division that is performing better? 2. In using ROI, what is the ROI of the division that is performing better? 3. In using residual income, what is the residual income of the division that is performing better?|
SquidGame Inc. presented the following information regarding its two divisions classified as investment centers. Jenny Division P 300,000 Operating Income Operating assets Net sales Johnny Division P500,000 2,500,000 2,750,000 375,000 1,200,000 1,500,000 Current Liabilities 240,000 WACC 15% 12.5% Current operating asset 500,000 750,000 The corporation is subject to a 35% tax rate. Weighted cost of capital is based on book value of long- term asset. Assuming the imputed interest rate is 18%. Required: 1. In using EVA, what is the EVA of the division that is performing better? 2. In using Residual Income, what is the residual income of the division that is performing better?
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual FundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $1,010,000 $1,060,000 $1,030,000 Operating expenses 492,000 390,400 727,600 Invested assets 3,700,000 3,100,000 2,100,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: Question Content Area 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department cost allocations. E.F. Lynch CompanyDivisional Income StatementsFor the Year Ended June 30, 20Y8 MutualFundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee…
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual FundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $1,090,000 $1,160,000 $1,080,000 Operating expenses 530,000 486,800 763,200 Invested assets 4,000,000 3,400,000 2,200,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 MutualFundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $ $ $…
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual FundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $1,120,000 $1,160,000 $1,130,000 Operating expenses 603,400 486,800 854,000 Invested assets 4,100,000 3,400,000 2,300,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 MutualFundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $fill in…
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue $1,500,000 1,570,000 1,530,000 Operating expenses 807,000 742000 1,158,000 Invested assets 5,500,000 4600000 3,100,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue…
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets invested in the center.investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual FundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $1,310,000 $1,370,000 $1,330,000 Operating expenses 705,200 578,000 1,006,000 Invested assets 4,800,000 4,000,000 2,700,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.…
Divisional income statements and return on investment analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Fee revenue Operating expenses Invested assets Required: Electronic Investment Mutual Fund Brokerage Banking Division Division Division $1,090,000 $1,130,000 $1,080,000 586,000 4,000,000 3,300,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Line Item Description Fee revenue Operating expenses Operating income Division 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 476,600 Mutual Fund Division Electronic Brokerage Division Feedback Check My Work 1. For…
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue $630,000 $650,000 $640,000 Operating expenses 340,200 308,000 484,000 Invested assets 2,300,000 1,900,000 1,300,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue $fill in…
The sales, income from operations, and invested assets for each division of Jackson Corporation are as follows: Sales Income from Operations Invested Assets Division E $4,000,000 $550,000 $2,400,000 Division F 4,800,000 760,000 2,500,000 Division G 7,000,000 860,000 2,800,000 (a) Using the expanded expression, determine the profit margin, investment turnover, and rate of return on investment for each division. Round answers to one decimal place. (b) Which Division is the most profitable per dollar invested? (a) (b)
The following results are available for Division X and Y:Division X Division YProfit before interest and tax P185 000 P172, 000Capital employed P1, 540, 000 P1, 650, 000The cost of capital is 10%.Calculate and comment on the performance of the departments based on:a. Return on capital employed (4 marks)b. Residual incom
The following are the composition of the total gross income of a domestic corporation which is subject to MCIT: sales (net of discount and allowances) 4,000,000.00 less: cost of sales 2,400,000.00 gross income dividends income 1,600,000.00 100,000.00 royalty income gain on sale of building total gross income 250,000.00 150,000.00 2,100,000.00 1. What is the regular corporate income tax, if the corporation has a total allowable deduction of 1,700,000? 2. What is the MCIT? 3. What is the minimum corporate income tax? MPG institute reported the following: related unrelated total 200,000.00 500,000.00 300,000.00 100,000.00 100,000.00 200,000.00 Gross income deductions taxable income 200,000.00 100,000.00 300,000.00 1. What is the tax due if the corporation is an exempt non-profit corporation? 2. Wht is the tax due if the corporation is a proprietary educational institution or non profit hospital?

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