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Dragon LTD is a private company whose management accountant is analyzing the performance of its centre using Return on Investment and Residual income methods . So it is trying to look at different components that are distributing to its success. The tests he wants to carry out are based on the following information prevented on the table below :

$

Current liabilities [ 3 5 % of short - term debt ] 24,500

Notes payable 65,600

Core current assets 74,000

Long - term assets 125,000

Accumulated Depreciation 18,000

Land for speculation 25,000

Other non - operating assets 14,000

Tax rate 30%

Prepaid expense$7,600

Beginning Inventory$2,000

Cost of goods manufactured$33,000

Ending Inventory$3,000

Sales$76200

Risk free rate 3%

Index in January 2021 15,200

Index in December 2021 16,500

Beta 1.8

Operating Expenses 19780

Accrued expense 15,000

Interest on debt 6%

Beginning operating assets$185,000

REQUIRED

1. Calculate interest expense, tax and EBIT

2 . Calculate the operating assets of the company

3 . Calculate ROI using the first method.

4 . What are the margin and the turnover of the company?

5 . Using Du Pont analysis, calculate the ROI of the company

6.What are the disadvantages of using Return on Investment.

7.Calculate the cost of equity.

8.What is the residual income of this investment centre?

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