Refer to the data in Exercise.

In Exercise, Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost-of-capital of 15%. Selected financial information (in thousands of dollars) for the first year of business follows:

a R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.

Required
Evaluate the performance of the two divisions assuming BMI uses economic valueadded.

East West Investment (beginning of year). .. .2,000 3,000 Current liabilities (beginning of year) 200 200 R&D expenditures (note a).. 500 400