1. Which measures of operating performance are combined to give ROTA?
2. ‘The tax law discriminates against share capital but favours debt.' Do you agree? Explain why.
3. As the manager of Lene division of Elenia SpA, you are interested in determining the division's return on investment. As division manager you have no control over financing assets, but you control acquisition and disposition of assets. The division controller has given you the following data for the division to aid you in calculating return on investment:
Accounting period 1 January-31 December 2004(amounts in thousands of euro)
Total assets (1 January) : 800
Total assets (31 December) : 1,050
Non-current liabilities (1 January) : 150
Non-current liabilities (31 December) : 192
Equity (1 January) : 556
Equity (31 December) : 606
EAT : 108
Interest expense on non-current liabilities : 8.4
Tax-rate = 30%
Which method would be most appropriate for calculating the division's return on investment? Why? Using this method, what is the return on investment for 2004?