Nobles Corporation provided the following segment margin income statement for two of its divisions: East and West. Nobles' actual weighted-average cost of capital is 10% and its tax rate is 30%.The East division balance sheet showed $300,000 of assets ($60,000 current and $240,000 long-term) and $320,000 of liabilities ($120,000 current and $200,000 long-term).The West division reported $360,000 of assets ($80,000 current and $280,000 long-term) and $260,000 of liabilities ($60,000 current and $200,000 long-term).
Required:
a.Calculate the economic value added for each division.
b.Which of the two managers will be rated higher on performance? Why?

Question

Nobles Corporation provided the following segment margin income statement for two of its divisions: East and West.  Nobles' actual weighted-average cost of capital is 10% and its tax rate is 30%.The East division balance sheet showed $300,000 of assets ($60,000 current and $240,000 long-term) and $320,000 of liabilities ($120,000 current and $200,000 long-term).The West division reported $360,000 of assets ($80,000 current and $280,000 long-term) and $260,000 of liabilities ($60,000 current and $200,000 long-term).
Required: 
a.Calculate the economic value added for each division.
b.Which of the two managers will be rated higher on performance? Why?

Quizplus · Accepted Answer

The Answer of Nobles Corporation provided the following segment margin income statement for two of its divisions: East and West.  Nobles' actual weighted-average cost of capital is 10% and its tax rate is 30%.The East division balance sheet showed $300,000 of assets ($60,000 current and $240,000 long-term) and $320,000 of liabilities ($120,000 current and $200,000 long-term).The West division reported $360,000 of assets ($80,000 current and $280,000 long-term) and $260,000 of liabilities ($60,000 current and $200,000 long-term).
Required: 
a.Calculate the economic value added for each division.
b.Which of the two managers will be rated higher on performance? Why?

Nobles Corporation Provided the Following Segment Margin Income Statement for Two