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EXERCISE 13-33 (20 MINUTES)

The economic value added (EV) i! de"ined a! "ollo#!$

ca%i&alo"co!&ave'a(e-)ei(h&ed

!lia*ili&iecu''en&!cen&e'+

Inve!&men&

a!!e&!&o&al!cen&e'+

Inve!&men&

incomeo%e'a&in(&a,-a"&e'

!cen&e'+Inve!&men&

addedvalue

Economic

o' .olden .a&e Con!&'uc&ion !!ocia&e!/ #e have &he "ollo#in calcula&ion! o" eachdivi!ion! EV

ivi!ion

"&e'-Ta,%e'a&inIncome

(in million!)To&al !!e&!(in million!)

Cu''en&4ia*ili&ie!

(in million!) CC

EconomicValue

dded(in million!)

Real E!&a&e

530(160) 5170 58 116 9 5182:

Con!&'uc&ion 52;(1

60)

5 80

5:

116 9 5::26

EXERCISE 13-36 (10 MINUTES)

1T'an!"e' %'ice 9

ou&la

RIa!ed

onNe& ooA

Value?

ve'ae

.'o!!ooAValue

RIa!ed

on

.'o!!ooAValue

1 5170/000 5200/000 5(70/000) 5600/000 Q 5700/000 Q2 170/000 120/000 30/000 260/000 127G 700/000 :0G3 170/000 ;2/000 ;H/000 166/000 762G 700/000 17:G6 170/000 76/000 8:/000 H1/000 11H7G 700/000 182G7 170/000 76/000 8:/000 2;/000 377:G 700/000 182G

>ve'ae ne& *ooA value i! &he ave'ae o" &he *einnin and endin *alance! "o' &he

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R4EM 13-62 (60 MINUTES)

a!ed on Ne& ooA Value a!ed on .'o!! ooA Value

Oea'

Incomee"o'e

e%'ecia&ionnnual

e%'ecia&ion

IncomeNe& o"

e%'ecia&ion

ve'aeNe& ooA

Value>

Im%u&edIn&e'e!&Cha'e?

Re!idualIncome

ve'ae.'o!!ooAValue

Im%u&edIn&e'e!&Cha'e?

Re!idualIncome

1 5170/000 5100/000 570/000 5670/000 567/000 5 7/000 5700/000 570/000

0

2 170/000 100/000 70/000 370/000 37/000 17/000 700/000 70/000

03 170/000 100/000 70/000 270/000 27/000 27/000 700/000 70/000

06 170/000 100/000 70/000 170/000 17/000 37/000 700/000 70/000

07 170/000 100/000 70/000 70/000 7/000 67/000 700/000 70/000

0

>ve'ae ne& *ooA value i! &he ave'ae o" &he *einnin and endin *alance! "o' &he

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1 Sale! ma'in$ income divided *< !ale! 'evenue

Ca%i&al &u'nove'$ !ale! 'evenue divided *< inve!&ed ca%i&al

Re&u'n on inve!&men&$ income divided *< inve!&ed ca%i&al (o' !ale! ma'in ,ca%i&al &u'nove')

Sale! ma'in$ 5760/000 L 5;/200/000 9 ;7GCa%i&al &u'nove'$ 5;/200/000 L 58/000/000 9 H0GRe&u'n on inve!&men&$ 5760/000 L 58/000/000 9 :G/ o'

;7G , H0G 9 :G

2 S&'a&e< (a)$ Income #ill *e 'educed &o 5670/000 *ecau!e o" &he lo!!/ and

inve!&ed ca%i&al #ill "all &o 5H/810/000 "'om &he di!%o!al RI 9 5670/000 L5H/810/000/ o' 707G Thi! !&'a&e< !hould *e 'eBec&ed/ !ince i& "u'&he' hu'&!a!h*u'n! %e'"o'mance

S&'a&e< (*)$ In &e'm! o" RI/ &hi! !&'a&e< nei&he' hu'&! no' hel%! Theaccele'a&ion o" ove'due 'eceiva*le! inc'ea!e! ca!h and dec'ea!e! accoun&!'eceiva*le/ %'oducin no e""ec& on inve!&ed ca%i&al " cou'!e/ i& i! %o!!i*le&ha& &he ne#l< acFui'ed ca!h could *e inve!&ed in !ome&hin &ha& #ould%'ovide a %o!i&ive 'e&u'n "o' &he "i'm

3 Oe! d'a!&ic cu&*acA in adve'&i!in could lead &o a lo!! o" cu!&ome'! and a'educed ma'Ae& !ha'e Thi! could &'an!la&e in&o 'educed %'o"i&! ove' &he lon&e'm i&h 'e!%ec& &o 'e%ai'! and main&enance/ 'educed ou&la

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R4EM 13-63 (CNTINUE)

6 nde'!on Manu"ac&u'in RI$ (56/700/000 - 53/:00/000) L 5;/700/000 9 12Galm each En&e'%'i!e! RI$ (5:/;70/000 - 5:/1H0/000) L 5;/127/000 9 HG

'om &he %'ecedin calcula&ion!/ *o&h inve!&men&! a%%ea' a&&'ac&ive iven&he cu''en& !&a&e o" a""ai'! (ie/ &he Pa'd#a'e ivi!ion! cu''en& RI o" :G)Po#eve'/ i" a!h*u'n de!i'e! &o ma,imiDe RI/ he #ould *e advi!ed &oacFui'e onl< nde'!on Manu"ac&u'in

Cu''en&Cu''en& =nde'!on

Cu''en& =nde'!on =alm each

IncomeKKKKKK 5 760/000 5 1/660/000> 5 2/010/000>>

Inve!&ed ca%i&alKK 8/000/000 1:/700/000 23/:27/000RIKKKKKKKK :G H;3G H71G

> 5760/000 = (56/700/000 - 53/:00/000)>> 5760/000 = (56/700/000 - 53/:00/000) = (5:/;70/000 - 5:/1H0/000)


1 The #eih&ed-ave'ae co!& o" ca%i&al (CC) i! de"ined a! "ollo#!$

McGraw-Hill/Irwin 2005 The McGraw-Hill

Companies, Inc.

Managerial Accounting, 6/e13-15

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eFui&

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08;2005:00/000/0005600/000/0

/000/000)(12)(5:000/000/000)(0:3)(560

ca%i&alo"co!&ave'ae-eih&ed


Companies, Inc.


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R4EM 13-66 (CNTINUE)

2 The &h'ee divi!ion! economic-value-added mea!u'e! a'e calcula&ed a!"ollo#!$

ivi!ion

"&e'-Ta,%e'a&in

Income(in million!)

To&al!!e&!

(inmillion!)

Cu''en&4ia*ili&ie!

(inmillion!)

CC 9

EconomicValuedded

(in million!)

aci"ic 516 (130) (5 ;0 5:) 08;2 9 5 3/7;8/200

lain! 567 (130) (5300 57) 08;2 9 5 2/H2:/000

&lan&ic 56H (130) (56H0 58) 08;2 9 5(12/1H1/200)

3 The EV anal

!u*!&an&ial nea&ive EV me'i&! &he immedia&e a&&en&ion o" &he manaemen&&eam


Companies, Inc.


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R4EM 13-6; (60 MINUTES)

1 a T'an!"e' %'ice 9 ou&la< co!& = o%%o'&uni&< co!&

9 5130 = 530 9 51:0

* T'an!"e' %'ice 9 !&anda'd va'ia*le co!& = (10G)(!&anda'd va'ia*le co!&)

9 5130 = (10G) (5130) 9 5163

No&e &ha& &he 'ame ivi!ion manae' #ould 'e"u!e &o &'an!"e' a& &hi! %'ice

2 a T'an!"e' %'ice 9 ou&la< co!& = o%%o'&uni&< co!&

9 5130 = 0 9 5130

* hen &he'e i! no e,ce!! ca%aci&

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R4EM 13-6; (CNTINUE)

e Inc'emen&al 'evenue %e' #indo# 5 310Inc'emen&al co!& %e' #indo#/ "o' &he .la!! ivi!ion$

T'an!"e' %'ice "o' "'ame "'om 'eFui'emen& 2(c) 518H

i'ec& ma&e'ial (.la!! ivi!ion) :0i'ec& la*o' (.la!! ivi!ion) 30Va'ia*le ove'head (.la!! ivi!ion) :0To&al inc'emen&al co!& 36H

Inc'emen&al lo!! %e' #indo# in !%ecial o'de'"o' .la!! ivi!ion 5 (3H)

The .la!! ivi!ion manae' ha! an incen&ive &o 'eBec& &he !%ecial o'de' *ecau!e&he .la!! ivi!ion+! 'e%o'&ed ne& income #ould *e 'educed *< 53H "o' eve'KK 32/700i,ed co!& !avin! (522/700 , 60G)KKK 8/000ec'ea!ed con&'i*u&ion ma'in "'om %ain&and !u%%lie! (5;:/000 , 20G)KKKKK (17/200)Inc'ea!ed adve'&i!inKKKKKKKKK (12/700)Income (lo!!) "'om clo!u'eKKKKKKK 5 (:/600)

> The cu''en& con&'i*u&ion ma'in 'a&io "o' ca'%e&in i! 30G (5:8/000 L5230/000) Thi! 'a&io #ill inc'ea!e &o 37G/ %'oducin a ne#con&'i*u&ion "o' &he line o" 5101/700 (5230/000 = 5:0/000) , 37GThe end 'e!ul& i! &ha& ca'%e&in! con&'i*u&ion ma'in #ill 'i!e *

404a --601 13,14 solutions

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