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 expenditures a Carolinas $ 1,700 170 1,000 250 850 Northeast $ 5,800 312 1,500 250 770 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 Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.

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 expenditures a
Carolinas
$ 1,700
170
1,000
250
850
Northeast
$ 5,800
312
1,500
250
770
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 Lasky Manufacturing uses economic value added (EVA).
a-2. Which division had the better performance?
Transcribed Image Text: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 expenditures a Carolinas $ 1,700 170 1,000 250 850 Northeast $ 5,800 312 1,500 250 770 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 Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?
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