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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. Allocated corporate overhead Cost of goods sold Divisional investment R&D Sales Selling, general and adeinistrative (excluding R&D) Division Canal (5000) $4,185 20,170 61,800 12,850 53,400 4,755 Lake (5000) $ 8,750 28,300 391,500 31,150 150,000 7,150 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 at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D Investments had taken place before this year. 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 in

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 Sales Selling, general and adeinistrative (excluding R&D) Division Canal (5000) $4,185 20,170 61,800 12,850 53,400 4,755 Lake (5000) $ 8,750 28,300 391,500 31,150 150,000 7,150 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 at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D Investments had taken place before this year. 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 in

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 32E: Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions:...
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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. Allocated corporate overhead Cost of goods sold Divisional investment R&D Sales Selling, general and administrative (excluding R&D) Economic value added Canal (5000) $4,185 20,170 61,800 12,850 53,400 4,755 Canal Division Division 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 at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D Investments had taken place before this year. 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 in thousands of dollars. Lake (5000) $ 8,750 28,300 391,500 31,150 150,000 7,150 Lake Division
Transcribed Image Text:$ 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 Sales Selling, general and administrative (excluding R&D) Economic value added Canal (5000) $4,185 20,170 61,800 12,850 53,400 4,755 Canal Division Division 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 at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D Investments had taken place before this year. 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 in thousands of dollars. Lake (5000) $ 8,750 28,300 391,500 31,150 150,000 7,150 Lake Division
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