【正文】 ine. 213 10–2 1. EverTent ROI = $55,000/$500,000 = % KiddieKamp ROI = $38,000/$400,000 = % 2. Add Only Add Only Add Both Maintain EverTent KiddieKamp Projects Status Quo Operating ine ... $ 1,055,000 $ 1,038,000 $ 1,093,000 $ 1,000,000 Operating assets .... 10,500,000 10,400,000 10,900,000 10,000,000 ROI ......................... % % % 10% The manager will invest only in the EverTent since that alternative has the highest ROI. 10–3 1. EverTent residual ine = $55,000 – ( $500,000) = $10,000 KiddieKamp residual ine = $38,000 – ( $400,000) = $2,000 2. Add Only Add Only Add Both Maintain EverTent KiddieKamp Projects Status Quo Operating ine ... $ 1,055,000 $ 1,038,000 $ 1,093,000 $ 1,000,000 Minimum ine* ... 945,000 936,000 981,000 900,000 Residual ine ..... $ 110,000 $ 102,000 $ 112,000 $ 100,000 *Minimum ine = Operating assets Minimum required rate of return. The manager will invest in both the EverTent and the KiddieKamp because residual ine is positive for each, and the overall residual ine is highest when both projects are accepted. 3. If the pany had retained the $900,000 and invested it at 9%, the ine would have been $81,000 ($900,000 ). However, the investment of the $900,000 in the two projects suggested by the Camping Division yields total incremental operating ine of $93,000 ($55,000 + $38,000). This is a gain of $12,000 before taxes. Yes, the correct decision was made. 214 10–4 1. AfterTax Weighted Percent Cost Cost Common stock ................................ 10year bonds ................................. * Weighted average cost of capital ................................................... * = – ( ). EVA = $210,000 – ( $2,000,000) = ($9,000) 2. Year 1: AfterTax Weighted Percent Cost Cost Common stock ................................ 10year bonds ................................. Weighted average cost of capital ................................................... EVA = $210,000 – ( $2,000,000) = $21,000 Year 2: AfterTax Weighted Percent Cost Cost Common stock ................................ 10year bonds ................................. Weighted average cost of capital ................................................... EVA = $210,000 – ( $2,000,000) = $51,000 3. AfterTax Weighted Percent Cost Cost Common stock ................................ 10year bonds ................................. Weighted average cost of capital ................................................... EVA = $750,000 – ( $5,000,000) = ($9,000) Year 1 (9% premium): AfterTax Weighted Percent Cost Cost Common stock ................................ 10year bonds ................................. Weighted average cost of capital ................................................... 215 EVA = $750,000 – ( $5,000,000) = $111,000 10–4 Concluded Year 2 (6% premium): AfterTax Weighted Percent Cost Cost Common stock ................................ 10year bonds ................................. Weighted average cost of capital ................................................... EVA = $750,000 – ( $5,000,000) = $231,000 10–5 1. Whirlmore, Inc. Ine Statement (in thousands) For the Year 20XX HomeSupreme Apartment International Total Sales ................................. $ 2,700 $ 2,400 $1,300 $ 6,400 COGS ................................ 1,770 1,870 1,040 4,680 Gross profit ................. $ 930 $ 530 $ 260 $ 1,720 Selling and admin. expense 640 180 100 920 Division profit............... $ 290 $ 350 $ 160 $ 800 Ine taxes (30%) ........... 87 105 48 240 Aftertax ine........... $ 203 $ 245 $ 112 $ 560 2. AfterTax Weighted Percent Cost Cost Common stock ............................... Bonds ............................................. * Weighted average cost of capital ................................................... *(1 – ) = . 3. HomeSupreme Apartment International Total Aftertax ine.............. $ 203,000 $ 245,000 $ 112,000 $560,000 Less cost of capital: ( $2,100,000) 208,320 ( $500,000)... 49,600 ( $400,000)... 39,680 297,600 216 EVA ................................. $ (5,320) $ 195,400 $ 72,320 $262,400 217 10–5 Concluded 4. While EVA is positive for Whirlmore, Inc., as a whole, it is negative for the HomeSupreme Division. Therefore, even though the HomeSupreme Division has positive ine, it needs to increase ine or reduce the capital used to generate positive economic value added. 10–6 1. Maximum price ..................... $ Minimum price ...................... Difference ............................. $ The number of cases......... 100,000 Increased profit ............. $ 165,000 Since the Glassware Division has idle capacity, the minimum price is the variable cost of $ for the excess capacity. (The avoidable selling costs of $ should not affect the