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    Evaluating investment centers with residual income

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    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 $2,500,000.Total interest expense was $1,900,000,and the hospitals tax rate was 35 percent.Hospital assets totaled $33,000,000, and noninterest-bearing current liabilities were $10,400,000. Superior has established a required rate of return equal to 17 percent of invested capital.

    Calculate the residual income/EVA of Lakeside Hospital.

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    Solution Summary

    This solution evaluates investment centers with residual income.