Question - Evaluating Investment Centers with Residual Income
Lakeside Hospital is a division of Superior Healthcare organized as an investment center. In the past year, the hospital reported an after-tax income of $2,210,000. Total Interest expense was $2,000,000 and the hospital's tax rate was 38 percent. Hospital assets totaled $33,900,000 and noninterest-bearing current liabilities were $9,390,000. Superior has established a required rate of return equal to 19 percent of invested capital.
Calculate the residual income/EVA of Lakeside Hospital.