Kristen Roper Oversees Her Company's Largest and Most Profitable Investment

question 43

Essay

Kristen Roper oversees her company's largest and most profitable investment center.She has asked you,as her staff accountant,to compute the center's ROI,residual income,and EVA for the month of August 20xx,using the following information (rounded to two decimal places):
$$\begin{array} { l r } \text { August 20xx operating income } & \$ 300,000 \\\text { August } 20 x x \text { sales } & 450,000 \\\text { Assets at July 31, 20xx } & 500,000 \\\text { Assets at August 31, 20xx } & 510,000 \\\text { August 20x6 income taxes } & 90,000 \\\text { Current liablities at August 31, 20xx } & 250,000 \\\text { Cost of capital } & 19 \% \\\text { Desired ROI } & 52 \%\end{array}$$

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Definitions:

Common-Resource Problem

A dilemma in the management of resources that are available to all but are susceptible to overuse and depletion because they are not excludable.

Nontoll Roads

Public roads that can be used without paying a fee, financed by taxes rather than direct user charges.

Public Goods

Products or services that are non-excludable and non-rivalrous, meaning they can be consumed by one person without preventing simultaneous consumption by others.

Common Resources

Resources that are not owned by anyone, but are available for use by everyone, often leading to overuse and depletion.