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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 Weat Sales revenue $1,000 200 $5,000 390 3,000 200 Income Investment (beginning of year) Current liabilities (beginning of year) 2,000 200 RED expenditures 500 400 *R&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 return on investment (ROI). ces Divisions ROI East West %6 a-2. Which division had the better performance? O East West

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 Weat Sales revenue $1,000 200 $5,000 390 3,000 200 Income Investment (beginning of year) Current liabilities (beginning of year) 2,000 200 RED expenditures 500 400 *R&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 return on investment (ROI). ces Divisions ROI East West %6 a-2. Which division had the better performance? O East West

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A-1. Evaluate the performance of the two divisions assuming BMI users return on investment (ROI). A-2. Which division had the better performance?
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 expenditures** | 500 | 400 | *R&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 return on investment (ROI). | **Divisions** | **ROI** | |---------------|-------------| | East | | | West | | **a-2.** Which division had the better performance? - East - West ### Explanation of Diagram: The table displays financial data for BMI’s East and West divisions, detailing sales revenue, income, investments at the beginning of the year, current liabilities, and R&D expenditures. These metrics are utilized to calculate the ROI for each division, which determines their financial performance relative to the investments made.
Transcribed Image Text: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 expenditures** | 500 | 400 | *R&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 return on investment (ROI). | **Divisions** | **ROI** | |---------------|-------------| | East | | | West | | **a-2.** Which division had the better performance? - East - West ### Explanation of Diagram: The table displays financial data for BMI’s East and West divisions, detailing sales revenue, income, investments at the beginning of the year, current liabilities, and R&D expenditures. These metrics are utilized to calculate the ROI for each division, which determines their financial performance relative to the investments made.
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