The Engine Division of The Cleveland Automotive Corporation had sales of $7,200,000 and operating income of $864,000 last year. The total assets of the Engine Division were $3,200,000 while current liabilities were $800,000. The Cleveland Automotive Corporation's target rate of return is 13% while its weighted average cost of capital is 9%. The effective tax rate for the company is 45%.
Required:
a. Calculate the sales margin.
b. Calculate the capital turnover.
c. Calculate the return on investment (ROI).
d. Calculate the residual income.

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The Answer of The Engine Division of The Cleveland Automotive Corporation had sales of $7,200,000 and operating income of $864,000 last year. The total assets of the Engine Division were $3,200,000 while current liabilities were $800,000. The Cleveland Automotive Corporation's target rate of return is 13% while its weighted average cost of capital is 9%. The effective tax rate for the company is 45%.
Required:
a. Calculate the sales margin.
b. Calculate the capital turnover.
c. Calculate the return on investment (ROI).
d. Calculate the residual income.

The Engine Division of the Cleveland Automotive Corporation Had Sales