The Engine Division of the Cleveland Automotive Corporation Had Sales

Essay

The Engine Division of The Cleveland Automotive Corporation had sales of $7,200,000 and operating income of $864,000 last year. The total assets of the Engine Division were $3,200,000 while current liabilities were $800,000. The Cleveland Automotive Corporation's target rate of return is 13% while its weighted average cost of capital is 9%. The effective tax rate for the company is 45%.
Required:
a. Calculate the sales margin.
b. Calculate the capital turnover.
c. Calculate the return on investment (ROI).
d. Calculate the residual income.