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PUSAT INVESTASI

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Delegation of Decision Making
(Decentralization)
Decision Making
is pushed down.
Top
Management

Middle Middle
Management Management

Supervisor Supervisor Supervisor Supervisor

Decentralization often occurs as organizations continue to grow.

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Decentralization

Advantages
Allows organization Uses specialized
to respond more knowledge and
quickly to events. skills of managers.

Frees top management

from day-to-day
operating activities.

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Measuring Performance
in Investment Centers
Investment Center
managers make
decisions that
affect both profit
and invested
capital. Corporate Headquarters

Investment Return on investment,

Center residual income, or
Evaluation economic value added

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Return on Investment (ROI)

Income
ROI =
Invested Capital

Income Sales Revenue

ROI = ×
Sales Revenue Invested Capital

Sales Capital
Margin Turnover

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Return on Investment (ROI)

Holly Company reports the following:

Income $ 30,000
Sales Revenue $ 500,000
Invested Capital $ 200,000

Let’s calculate ROI.

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Return on Investment (ROI)

Income Sales Revenue

ROI = ×
Sales Revenue Invested Capital

$30,000 $500,000
ROI = ×
$500,000 $200,000

ROI = 6% × 2.5 = 15%

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Improving R0I

 Decrease
Expenses
 Increase  Lower
Sales Invested
Prices Capital

Three ways to improve ROI

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Improving R0I

Holly’s manager was able to increase

sales revenue to $600,000 which
increased income to $42,000.
There was no change in invested capital.

Let’s calculate the new ROI.

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Return on Investment (ROI)

Income Sales Revenue

ROI = ×
Sales Revenue Invested Capital

$42,000 $600,000
ROI = ×
$600,000 $200,000

ROI = 7% × 3.0 = 21%

Holly increased ROI from 15% to 21%.
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Residual Income
Investment center profit
– Investment charge
= Residual income

Investment capital
× Imputed interest rate
= Investment charge

Investment center’s
minimum required
rate of return
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Residual Income

Flower Co. has an opportunity to invest

$100,000 in a project that will return $25,000.
Flower Co. has a 20 percent required rate of
return and a 30 percent ROI on existing
business.

Let’s calculate residual income.

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Residual Income
Investment center profit = $25,000
– Investment charge = 20,000
= Residual income = $ 5,000

Investment capital = $100,000

× Imputed interest rate = 20%
= Investment charge = $ 20,000

Investment center’s
minimum required
rate of return
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Economic Value Added

Economic value added tells us how much
shareholder wealth is being created.

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Economic Value Added

Investment center’s after-tax operating income
– Investment charge
= Economic Value Added

Investment Investment Weighted

( center’s
total assets
– center’s
current liabilities )  average
cost of capital

After-tax Market Cost of Market

( cost of  value
debt of debt ) (  equity  value
capital of equity )
Market Market
value  value
of debt of equity
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Economic Value Added

The Atlantic Division of Suncoast Food Centers reported

the following results for the most recent period:

Atlantic's pretax income $ 6,750,000

Atlantic's total assets 45,000,000
Atlantic's current liabilities 600,000
Market value of Suncoast's debt 40,000,000
Market value of Suncoast's equity 60,000,000
Interest rate on Suncoast's debt 9%
Cost of Suncoast's equity capital 12%
Tax rate 30%

Compute Atlantic Division’s economic value added.

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Economic Value Added

First, let’s compute the

weighted-average cost of capital

(9% × (1 – 30%) × $40,000,000) + (.12 × $60,000,000)

= 0.0972
$40,000,000 + $60,000,000

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Economic Value Added

$6,750,000 × (1 – 30%)

$4,725,000 After-tax operating income

– 4,315,680
= $ 409,320 Economic 80value added
80

($45,000,000 – $600,000) × 0.0972 = $4,315,680

(9% × (1 – 30%) × $40,000,000) + (.12 × $60,000,000)

= 0.0972
$40,000,000 + $60,000,000

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Economic Value Added

33,750,000 × (1 – 25%)

25,312,500 After-tax operating income

– 26,640,000
= - 1,327,,500 Economic
80 value added
80

(225,000,000 – 3.000,000) × 0.12 = 26,640,000

(10% × (1 – 25%) × 200,000,000) + (.15 × 300,000,000)

= 0.12
200,000,000 + 300,000,000

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LAPORAN SEGMEN

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Latihan Soal EVA
BERIKUT INI TERKAIT DATA TAHUNAN
DARI PT X
Laba sebelum pajak Rp 33,750,000
Total aset 225,000,000
Hutang lancar 3,000,000
Nilai pasar utang 200,000,000
Nilai pasar ekuitas 300,000,000
Interest rate Utang 10%
Cost of equity capital 15%
Tax rate 25%

HITUNGLAH ECONOMIC VALUE ADDED (EVA)

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