5 *Net Income Is After Tax but Before Interest
Honolulu's Weighted

question 10

Multiple Choice

5. Honolulu Enterprises has two decentralized divisions (Coconut and Guava) that have decision making responsibility over the amount of resources invested in their divisions.Recent financial extracts for both divisions are presented below:
$\begin{array}{c}\begin{array}{lll}\\\text {Fixed assets, gross}\\\text {Accumulated depreciation}\\\text {Other assets}\\\text {Liabilities}\\\text {Sales}\\\text {Net income after tax*}\\\text {Average age of fixed assets (years) }\end{array}\begin{array}{l}\text { Coconut }\\\$ 4,500 \\\$ 2,700 \\\$ 900 \\\$ 900 \\\$ 12,150 \\\$ 1,330 \\ 15 \end{array}\begin{array}{lll}\text {Guava}\\\$7,200\\\$2,160\\\$1,350\\\$1,800\\\$12,960\\\$1,810\\5\end{array}\end{array}$
*Net income is after tax but before interest
Honolulu's weighted average cost of capital (WACC) is 15% and the company uses residual income as a method to evaluate performance.Which of the following statements is correct?

• A)Coconut's ROI will be raised by divesting of a project with a 20% ROI but its RI will be lower.
• B)Coconut's RI will decrease by taking on a project with a $12 cost and net income before interest of $3.
• C)Guava's RI will increase by taking on a project with an $8 cost and net income before interest of $1.1.
• D)Coconut's RI is less than Guava's RI.
• E)None of the choices are correct

Comprehend the role and establishment of control limits within the quality planning process.

Understand the different categories of product or service requirements in the quality domain.

Recognize the historical contribution and the application of control charts in quality management.

Identify the various sources of information crucial for effective project planning.

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Definitions:

Shares Exchange

The process or act of trading shares of stock, typically through a formal exchange, where securities are bought and sold by investors.

Plan for Merger

A detailed strategy outlining the method and steps by which two or more companies will legally consolidate into one entity.

Shareholder Notice

A communication sent to the shareholders of a company informing them of important issues or events.

Shareholder Approval

Shareholder approval refers to the affirmative vote of shareholders, typically required for significant company decisions or changes, such as mergers and acquisitions.