Question

Lily factory allows its departments to operate as autonomous units. Their results for the current year were as follows:     Candy   Beverage   Packaging Revenues   $2,200,000   $670,000   $1,200,000 Current assets   320,000   112,000   535,000 Capital assets   765,000   488,000   1,320,000 Current liabilities   276,000   107,000   432,000 Net operating income   312,000   57,000   420,000 After-tax income   218,000   39,000   299,000 Weighted average cost of capital   7.5%   7.5%   7.5%

Required: For each division compute the:

1.   Return on sales

2.   Return on investment based on total assets employed

3.   Economic value added

4.   Residual income based on net operating income

Answer 1