Exercise 14-35 (Static) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year). R&D expendituresa Carolinas $ 800 160 1,000 160 400 Northeast $4,000 312 1,500 160 320 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 Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?
Exercise 14-35 (Static) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year). R&D expendituresa Carolinas $ 800 160 1,000 160 400 Northeast $4,000 312 1,500 160 320 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 Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Exercise 14-35 (Static) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4)
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial
information (in thousands of dollars) for the first year of business follows:
Sales revenue
Income
Reg A1
Carolinas
$ 800
160
Reg A2
1,000
160
400
Northeast
$4,000
Divisional assets (beginning of year)
Current liabilities (beginning of year).
R&D expenditures
OR&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 Lasky Manufacturing uses economic value added (EVA).
a-2. Which division had the better performance?
Complete this question by entering your answers in the tabs below.
312
1,500
160
320
Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA).
Note: Note: Enter answers in thousands of dollars. Round your answers to 1 decimal place.
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