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'13.?» .0111
I12
I17 Review of Chapters 12 and 13; ROI and EVA'; centralised versus domh‘dlsed service units; service company
Angler Fisheries operates a chain of budget seafood restaurants, as well as its own fishing fleet. which operates off the south coast of Australia. Angler is structured into three divisions: the Northern
Australian Division and the Southern Australian Division. which manage the restaurants. and the Fishing
Fleet Division. Each division operates as a separate stand—alone business. and is designated as an
investment centre. The company uses return on investment to evaluate the performance of each division. For the
purposes of calculating divisional ROI. investment capital is defined as total assets less current liabilities.
and divisional operating profit after tax is used. Each division is required to achieve an ROI of at least 10
per cent after tax. To calculate divisional EVA“. the weighted average cost of capital of 3 per cent is
used. The company income tax rate is 30 per cent. The date relate to financial performance for the last year.
Two years ago. the Fishing Fleet Division replaced most of its fleet. The Southern Australian Division is the oidast division and owns all of its assets, while the Northern Australian Division leases most of its
restaurant sites. The lease payments are treated as an expense. .-z “Eff: -:-. .a - r. u 'I' -. ,,, .. .-. . $ 5 4'00 000 ii 1 200 DDD $ 900 GOD Total assets 52 50-0 000 5 DOG 000 25 200 000
Current liabilities 12 DIR] 000 3 000 000 2 400 (100 Required: 1 Calculate the return on investment for each division for last year. 2 Which division has the best performance? Isthere any other information in the case that needs to be
taken into ascount when interpreting divisional performance using ROE? 5 Calcuiate the El'v'ilt‘II for each division for last year. Compare the financial performance of each division Using both ROI and EVA”. Would you recommend any adjustments to the divisional accounting data, to provide figures {or ROI and EVA” that can be more readily compared? I'm-h

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