Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which arebased on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than thoseproduced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment isas of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROIand residual income. Ignore income taxes.Allocated corporate overheadCost of goods soldDivisional investmentRADSalesSelling, general and administrative(excluding R&D)DivisionCanal (5000)$4,12020,04060,50012,20050,8004,560Lake (5000)$9,40029,600398,00031,800190,0007,500R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent at thebeginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D investments had taken place before thisyear.Required:a. Compute EVA for the two divisions.Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Enter your answers inthousands of dollars.

Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year, Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Allocated corporate overhead Cost of goods sold Divisional investment R&D Division Canal (5000) $ 4,120 20,040 60,500 12,200 Lake (5000) $9,400 29,600 398,000 31,800

Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year, Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Allocated corporate overhead Cost of goods sold Divisional investment R&D Division Canal (5000) $ 4,120 20,040 60,500 12,200 Lake (5000) $9,400 29,600 398,000 31,800

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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Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Division Canal ($000) Lake ($000) Allocated corporate overhead $ 4,100 $ 9,600 Cost of goods sold 20,000 30,000 Divisional investment 60,100 400,000 R&D 12,000 32,000 Sales 50,000 100,000 Selling, general and administrative (excluding R&D) 4,500 8,000 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent…
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