(Solution) - Bear Paints is a national paint manufacturer and retailer The -(2025 Original AI-Free Solution)

Paper Details

Bear Paints is a national paint manufacturer and retailer. The company is segmented into five divisions: Paint stores (branded retail locations), Consumer (paint sold through stores like Sears and Lowe?s), Automotive (sales to auto manufacturers), International, and Administration. The following is selected divisional information for its two largest divisions: Paint stores and Consumer:

Management has specified a 21% target rate of return. The company?s weighted average cost of capital is 14%. The company?s effective tax rate is 34%.
Requirements
1. Calculate each division?s profit margin. Interpret your results.
2. Calculate each division?s asset turnover. Interpret your results.
3. Use the expanded ROI formula to confirm your results from Requirement 1.
Interpret your results.
4. Calculate each division?s RI. Interpret your results and offer a recommendation for any division with negative RI.
5. Calculate each division?s EVA. Interpret your results.
6. Describe some of the factors that management considers when setting its minimum target rate ofreturn.