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Financial Analysis


Part 4 Global Resources is a division of an international conglomerate. The following information relates to its performance: Target profit margin 15% Target asset turnover 1.5 times Charge for capital 13% Weighted average cost of capital 11.7% Income tax rate 30% Investment $9,500,000 Total assets $12,825,000 Current liabilities $475,000 Sales $11,400,000 Variable costs $ 4,560,000 Fixed costs $ 5,130,000 Allocated common and corporate costs $ 817,000 To complete Part 4: • Calculate the divisional margin for the year. • Calculate the DuPont ROI, and evaluate the performance of Global Resources in relation to the expected performance. • Calculate the residual income. • Calculate the EVA. • Why are the residual income and EVA different? • Discuss the appropriateness of the use of ROI, RI and EVA as performance measures. Justify your response.