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Calculate Return on Investment (ROI) and Economic Value Added (EVA).

Use the following data for Eastern Investments Company to calculate ROI and EVA for 2013 and 2014.  Analyze the results.

Eastern Investments                                                          2013                           2014  

Sales                                                                 $325,000,000                        $395,000,000

Net Operating Profit After Tax                                 $55,000,000                          $60,000,000

Net Income                                                           $35,000,000                          $42,000,000

Invested Capital                                                   $125,000,000                        $145,000,000

Adjusted Average Invested Capital                         $350,000,000                        $380,000,000

Cost of Capital                                                                 11%                                      11%

Required:

  1. Calculate ROI for 2013 and 2014
  2. Calculate EVA for 2013 and 2014
  3. Is Eastern Investments performance improving year on year?  Why?

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