Evaluate the performance of two divisions assuming UEI uses economic value added (EVA). Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisionsInvest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI has a cost ofcapital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows.Сommercial$37,0003,88527,750ConsumerSales revenueDivisional incomeDivisional investmentCurrent liabilities$22,0003,85027,5001,0001,000800RAD1,000Required:Evaluate the performance of the two divisions assuming UEI uses economic value added (EVA). (Enter your answers in thousands ofdollars rounded to 1 decimal place.)EVA of Consumer divisionEVA of Commercial divisionWhich division performed better?

In the given case; No finance charge (Interest) is given. R&D should be capitalized. EVA = NOPAT…

Answered: Evaluate the performance of two…

Business

Accounting

Evaluate the performance of two divisions assuming UEI uses economic value added (EVA).

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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Question

Evaluate the performance of two divisions assuming UEI uses economic value added (EVA).

Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions
Invest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI has a cost of
capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows.
Сommercial
$37,000
3,885
27,750
Consumer
Sales revenue
Divisional income
Divisional investment
Current liabilities
$22,000
3,850
27,500
1,000
1,000
800
RAD
1,000
Required:
Evaluate the performance of the two divisions assuming UEI uses economic value added (EVA). (Enter your answers in thousands of
dollars rounded to 1 decimal place.)
EVA of Consumer division
EVA of Commercial division
Which division performed better?

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