Exercise 14-30 (Static) Evaluating Business Units Using Economic Value Added (EVA) (LO 14-4)

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

	East			West
Sales revenue	$	1,000		$	5,000
Income		237	.5		435
Investment (beginning of year)		2,000			3,000
Current liabilities (beginning of year)		200			100
R&D expendituresa		500			400

^aR&D is assumed to benefit two years. All R&D expenditure is made at the beginning of the first year.

Required:

Evaluate the performance of the two divisions assuming BMI uses economic value added (EVA). (Enter answers in thousands of dollars. Round your answers to 1 decimal place.)