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Mary's Auto Shop Inc
Mary's Auto Shop Inc. allows its divisions to operate as autonomous units. Their results for the current year were as follows:
Sport
Terrain
City
Revenues
$1,700,000
$800,000
$6,000,000
Current assets
230,000
40,000
410,000
Capital assets
870,000
660,000
1,590,000
Current liabilities
100,000
100,000
500,000
Net operating income
232,000
42,000
602,000
After-tax income
186,000
34,000
482,000
Weighted average cost of capital
10%
10%
10%
Required:
For each division compute (to two decimal) the:
1. Return on sales in %
2. Return on investment (to two decimal) based on total assets employed in %
3. Economic value added
4. Residual income based on net operating income
Expert Solution
PFA
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