The Tandem Division of the Great Adventures Cycles Company Had

question 2

Multiple Choice

The Tandem division of the Great Adventures Cycles Company had the following results last year (in thousands) . $$\begin{array} { | l | r r | } \hline \text { Sales } & \$ & 4,000,000 \\\hline \text { Operating incare } & \$ & 480,000 \\\hline \text { Total assets } & \$ & 2,000,000 \\\hline \text { Current liabilities } & \$ & 300,000 \\\hline\end{array}$$ Management's target rate of return is 10% and the weighted average cost of capital is 8%.Its effective tax rate is 40%.
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What is the Tandem division's Economic Value Added (EVA) ?

• A)$136,000
• B)$152,000
• C)$280,000
• D)$288,000

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Definitions:

Management Overhead

Represents the costs associated with administrative and management functions that are not directly related to production or service delivery.

Tall Structure

An organization structure that has narrow spans of control and many hierarchical levels.

Wider Spans of Control

Refers to a leadership approach where a single manager or supervisor oversees a larger number of subordinates, indicating a flatter organizational structure.

Management Costs

Expenses associated with directing and controlling a business or organization.