Refer to the data in Exercise 14-37. 

Data in Exercise 14-37.

Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows:

Required

Evaluate the performance of the two divisions assuming Houghton Chemicals uses residual income.  

Transcribed Image Text:

Sales revenue.. Divisional income. Divisional investment Current liabilities R&D... Alloys $7,400 777 5,550 160 200 Petro $5,500 945 7,000 200 300