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?

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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