ELN Waste Management has a subsidiary that disposes of hazardous waste and subsidiary that collects and disposes of residential garbage. Information related to the two subsidiaries follows:

                                                                 Hazardous                         Residential

                                                                       Waste                             Waste

Total Assets                         $15,000,000                        $87,000,000

Noninterest-bearing current liabilities   $15,000,000                        $87,000,000

Net Income                         $15,000,000                        $87,000,000

Interest expense                     $15,000,000                        $87,000,000

Required rate of return                    10%                                13%

Tax rate                                 40%                               40%

Required

  1.  Calculate ROI for both subsidiaries.
  2. Calculate EVA for both subsidiaries. Note that since no adjustments for accounting distortions are being made, EVA is equivalent to residual income.
  3. Which subsidiary has added the most to share hold value in the last year?
  4. Based on the limited information, which subsidiary is the best candidate for expansion? Explain.