Select Page
  

The following data are available for two divisions of Solomons Company: North DivisionSouth DivisionDivision operating profit$9,200,000 $42,000,000 Division investment 46,000,000 336,000,000The cost of capital for the company is 7 percent. Ignore taxes. Required:a-1.Calculate the ROI for both North and South divisions. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)a-2. If Solomons measures performance using ROI, which division had the better performance?North/Southb-1. Calculate the EVA for both North and South divisions. (The divisions have no current liabilities.)b-2.If Solomons measures performance using economic value added, which division had the better performance?North/Southc. Would your evaluation change if the company’s cost of capital were 15.0 percent?1. When evaluated by ROI?Yes/No2.When evaluated by EVA?Yes/No