Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of
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Question:
Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 20 percent. Selected financial information (in thousands of dollars) for the first year of business follows.
East | West | |||||
Sales revenue | $ | 3,600 | $ | 7,600 | ||
Income | 655 | 780 | ||||
Investment (beginning of year) | 1,650 | 2,600 | ||||
Current liabilities (beginning of year) | 300 | 300 | ||||
R&D expendituresa | 1,000 | 900 | ||||
aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.
Required:
a-1. Evaluate the performance of the two divisions assuming BMI uses economic value added. (Enter answers in thousands of dollars. Round your answers to 1 decimal place.)
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Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date: