Exam 22: Multinational Performance Measurement and Compensation

Use the information below to answer the following question(s). Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent; and, equity capital that has a market value of $6 million (book value of $2 million). The cost of equity capital is 5 percent, while the tax rate is 30 percent. Brandorf Company has profit centres in the following locations with the following data: -What is EVA for Ottawa?

Use the information below to answer the following question(s). The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125: * = "of long-term assets at historical cost" -What is the current cost annual depreciation in year 4 dollars?

Use the information below to answer the following question(s). The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125: * = "of long-term assets at historical cost" -What is the year 4 operating income using year-4 current cost amortization?

Which of the following is NOT a reason for evaluating subunits over a multi-year time horizon?

Use the information below to answer the following question(s). The top management at Munchie Company, a manufacturer of computer games, is attempting to recover from a flood, which destroyed some of its accounting records. The main computer system was also severely damaged. The following information was salvaged: -What is the Beta Division's investment turnover?

The Shamrock Corporation manufactures flower pots in Canada and Ireland. The operations are organized as decentralized divisions. The following information is available for the year just ended: The exchange rate at the time of Shamrock's investment (the end of the previous year) in Ireland was $1.35 Canadian to 1.00 Euro. During the year, the Euro weakened steadily in value and the exchange rate at the end of the current year was 1.24 Canadian = $1.00 Euro. The average exchange rate during the year was 1.28 Canadian = $1.00 Euro. Required: a. Calculate the Canadian Division's ROI for last year based on dollars. b. Calculate the Irish Division's ROI for last year based on Euros. c. Which of Shamrock's two divisions earned the better ROI? Explain your answer, complete with supporting calculations showing the Irish Division ROI in Canadian dollars.

National Can Company has three divisions, Eastern, Midwestern, and Western. Because of very different accounting methods and inflation rates in different countries it is considering multiple evaluation measures. Information gathered about the divisions for the year just ended follows: ‪ The company is currently using a required rate of return of 15 percent. Required: a. Compute the ROI using both book value and current value for all divisions. Round to three decimal places. b. Compute residual income using book value and current value for all divisions. c. Does book value or current value provide the better basis for performance evaluation? Why? Which division is the most successful?

Last year Reynolds Ltd. reported the following results: Required: a. Using the DuPont method, calculate the company's return on investment for the year just ended. b. Assuming the company's sales, operating expenses, and assets remain the same as last year, by how much would the gross margin percentage have to increase to achieve a 20% return on investment? c. Assume the company sets a minimum required return of 13%, what would the residual income be?

Answer the following question(s) using the information below: Coldbrook Company has two sources of funds: long-term debt with a market and book value of $15 million issued at an interest rate of 10%, and equity capital that has a market value of $9 million (book value of $5 million). Coldbrook Company has profit centres in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 15%, while the tax rate is 30%. -What is the EVA for Brooksville?

Use the information below to answer the following question(s). The top management at Munchie Company, a manufacturer of computer games, is attempting to recover from a flood, which destroyed some of its accounting records. The main computer system was also severely damaged. The following information was salvaged: -What is the Gamma Division's return on investment?

How should environmental and ethical issues affect managers' performance evaluations?

Use the information below to answer the following question(s). The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125: * = "of long-term assets at historical cost" -What is the ROI using current cost?

Answer the following question(s) using the information below: Carriage Ltd. manufactures baby carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for the year just ended: The company is currently using a 12% required rate of return. -What are Wheels and Assembly Divisions' return on investment based on book values, respectively?

Which of the following is a difference between a diagnostic control system and an interactive control system?

Use the information below to answer the following question(s). Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent; and, equity capital that has a market value of $6 million (book value of $2 million). The cost of equity capital is 5 percent, while the tax rate is 30 percent. Brandorf Company has profit centres in the following locations with the following data: -What is EVA for Regina?

Use the information below to answer the following question(s). The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125: * = "of long-term assets at historical cost" -What is the net book value (NBV )of the long-term assets at current cost at the end of year 4?

Answer the following question(s) using the information below: Carriage Ltd. manufactures baby carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for the year just ended: The company is currently using a 12% required rate of return. -What are Wheels's and Assembly's residual incomes based on current values, respectively?

Miller Medical Services provided the following information for its operations in the Hospital Bed Division. What is the Hospital Bed's residual income?

Use the information below to answer the following question(s). Ruth Cleaning Products manufactures home cleaning products. The company has two divisions, Bleach and Bleach-2. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for the year just ended: The company is currently using a required rate of return of 15 percent. -What are Bleach's and Bleach-2's return on investment based on current values?

Answer the following question(s) using the information below: Carriage Ltd. manufactures baby carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for the year just ended: The company is currently using a 12% required rate of return. -What are Wheels's and Assembly's residual incomes based on book values, respectively?