Nantucket Company has two divisions that report on a decentralized basis. Their results for 2014
were as follows:
Helmet Ball
Sales $150,000 $300,000
Operating Income $ 15,000 $ 45,000
Average Assets $ 75,000 $150,000
Capital Employed $ 90,000 $200,000
Weighted average cost of capital 12% 12%
Required:
Assuming Nantucket has a 30% tax rate, compute the following amounts for each division (show
all workings):
a. Return on investment (ROI).
b. Residual income if the desired rate of return is 20 percent.
c. EVA.
d. Turnover.
e. Margin.