Problem 14-41 Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown below. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes.

AC Division Allocated overhead $615

SO Division Allocated overhead $ 1,650

AC Cost of goods sold $3,230

SO Cost of goods sold $6,000

AC Divisional investment $9,300

SO Divisional investment $78,500

AC R&D $2,150

SO R&D $3,600

AC Sales $8,600

SO Sales $18,500

AC SG&A $745

SO SG&A $1,380

R&D is assumed to have a two-year life in the AC Division and a nine-year life in the SO division. All R&D expenditures are spent at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D investments had taken place before this year.

Required: Compute EVA for the two divisions. (Do not round intermediate calculations.)