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Problem 10-28

(b)Calculate residual income.(If the amount is negative then enter with a negative sign preceding the number e.g. -5,125 or parenthesis. e.g. (5,125).)

 Which division performed the best?Which division performed the best?Residual Income Bristol \$ Darden \$ Gregory \$

Which division performed the best?

Ashton Corporation recently announced a bonus plan to reward the manager of its most profitable division. The three divisional managers are to decide which performance measure will be used to evaluate profitability. Ashton Corporation requires a 10% minimum return on investment.

The following information is available for the year just ended.

 Division GrossBook Valueof Assets DivisionalOperatingIncome Bristol \$800,000 \$94,780 Darden 754,800 91,460 Gregory 458,000 57,810

(a)Calculate return on investment.(Round ROI to 2 decimal places, e.g. 5.12%.)

 Return on Investment Bristol % Darden % Gregory %

(c) Assume that Ashton’s weighted-average cost of capital is 6% and its tax rate is 20%. Calculate economic value added. (If the amount is negative then enter with a negative sign preceding the number e.g. -5,125 or parenthesis. e.g. (5,125).)

 Economic Value Added Bristol \$ Darden \$ Gregory \$

Which division performed the best?