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The Hotel Division of Treasure Island Corporation Had the Following

Question 151

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The Hotel Division of Treasure Island Corporation had the following results last year.
 Sales $15,000,000 Operating incore $6,000,000 Total assets $10,000,000 Current liabilities $3,000,000\begin{array} { | l | c | } \hline \text { Sales } & \$ 15,000,000 \\\hline \text { Operating incore } & \$ 6,000,000 \\\hline \text { Total assets } & \$ 10,000,000 \\\hline \text { Current liabilities } & \$ 3,000,000 \\\hline\end{array} Management's target rate of return is 14% and the weighted average cost of capital is 10%.Its effective tax rate is 35%.
Required:
a.Calculate the return on investment (ROI).
b.Calculate the residual income.
c.Calculate the Economic Value Added (EVA).

Correct Answer:

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