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Win Company Has the Following Data Dixie Company Has a Target ROI of 20% and a A&\text

Question 123

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Win Company has the following data:  Division A Division B Sales $400,000$300,000 Contribution margin 160,000125,000 Operating income 80,00030,000 Average operating assets 320,000200,000 Cost of capital 15%15%\begin{array}{lll}&\text { Division } A&\text { Division } B\\\text { Sales } & \$ 400,000 & \$ 300,000 \\\text { Contribution margin } & 160,000 & 125,000 \\\text { Operating income } & 80,000 & 30,000 \\\text { Average operating assets } & 320,000 & 200,000 \\\text { Cost of capital } & 15 \% & 15 \%\end{array} Dixie Company has a target ROI of 20% and a 0% income tax rate.
Required: Calculate the following amounts for each division:
A. Margin ratio
B. Turnover ratio
C. ROI
D. Residual income
E. EVA

Correct Answer:

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Division A:
A. Margin ratio = $80,000/$4...

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