Exam 23: Performance Measurement, compensation, and Multinational Considerations

To calculate the value of fixed assets for an overseas branch,the historical rate of exchange is used for its conversion.

Coldbrook Company has two sources of funds: long-term debt with a market and book value of $19,000,000 issued at an interest rate of 11%,and equity capital that has a market value of $7,000,000 (book value of $5,000,000).Coldbrook Company has profit centers in the following locations with the following operating incomes,total assets,and current liabilities.The cost of equity capital is 16%,while the tax rate is 35%. What is the EVA^® for Brooksville? (Round intermediary calculations to four decimal places. )

The top management at Amore Corp,a manufacturer of computer games,is attempting to recover from a flood that destroyed some of their accounting records.The main computer system was also severely damaged.The following information was salvaged: What is the Gamma Division's return on investment (d)?

The weighted-average cost of capital (WACC)equals ________.

Ventaz Corp.purchased assets for its overseas branch for $15,000 The rate of conversion at the time of purchase of asset was $1.400 / Euro.If the company evaluates a project's ROI based on its initial costs and its operating income and does that in the foreign currency,what value of assets in Euros to be used to calculate the ROI if the rate current conversion rate is $1.511 / Euro and the average rate being $1.410 / Euro?

What targets should companies use,and when should they give feedback to managers regarding their performance relative to the targets?

Which of the following is the expression of the DuPont method of profitability analysis?

LaserLife Printer Cartridge Company is a decentralized organization with several autonomous divisions.The division managers are evaluated,in part,on the basis of the change in their return on invested assets.Operating results for the Packer Division for 2018 are budgeted as follows: Operating assets for the division are currently $3,600,000.For 2018,the division can add a new product line for an investment of $600,000.The new product line will generate sales of $1,600,000 and will incur fixed expenses of $600,000 annually.Variable costs of the new product will average 60% of the selling price. Required: a.What is the effect on ROI of accepting the new product line? b.If the company's required rate of return is 6% and residual income is used to evaluate managers,would this encourage the division to accept the new product line? Explain and show computations.

All of the following are ways to calculate different versions of ROI except ________.

Antique Corp uses the investment center concept for the museums that it manages.Selected operating data for three of its museums for 2015 are as follows: Required: a.Compute the return on investment for each division. b.Which museum manager is doing best based only on ROI? Why? c.What other factors should be included when evaluating the managers?

The top management at Amore Corp,a manufacturer of computer games,is attempting to recover from a flood that destroyed some of their accounting records.The main computer system was also severely damaged.The following information was salvaged: What were the sales for the Beta Division (a)?

Executive compensation plans are based on both financial and nonfinancial performance measures.Discuss

ROI,RI,or EVA measures are more appropriate than ROS to measure the performance of a company.Why?

A company has operating income of $300,000,revenues of $1,500,000,total assets of $2,000,000 and an ROI of 15%.To improve the ROI,to increase ROI to 20%,which of the following investment turnovers would need to be achieved?

Sensitive performance measures ________.

Bouvous Corporation had the following information for 2015: Revenue \ 400,000 Operating expenses 350,000 Total assets 530,000 What is the return on investment?

Briefly explain each of the four levels of control.Why does a company need to implement more than a diagnostic control system?

Which of the following statements is true?

What are the factors involved in choosing the timing of the feedback in designing accounting-based performance measures?

Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city.Consolidated has a 15% required rate of return on investment in order for a branch station to be viable.Select operating data for three of its stations for 2015 are as follows: Required: a.Compute the return on investment for each station. b.Which station manager is doing best based only on ROI? Why? c.Are any of the stations in danger of being closed due to lack of performance? d.What other factors should be included when evaluating the managers?