Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of...
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Accounting
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 | 200 | 390 | ||||
| Investment (beginning of year) | 2,000 | 3,000 | ||||
| Current liabilities (beginning of year) | 200 | 200 | ||||
| R&D expendituresa | 500 | 400 | ||||
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 (EVA). (Enter answers in thousands of dollars. Round your answers to 1 decimal place.)
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