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

Divisional Performance Analysis and Evaluation The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Investe assets and condensed income statement data for the past year for each division are as follows: Sales Cost of goods sold Operating expenses Invested assets Required: Road Bike Division $ 5,610,000 2,468,000 2,076,100 5,100,000 Mountain Bike Division $ 5,880,000 2,764,000 1,763,600 4,200,000 1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no service department charges. Free Ride Bike Company Divisional Income Statements For the Year Ended December 31, 20Y7 Road Bike Division Mountain Bike Division Sales Cost of goods sold Gross profit Operating expenses Income from operations

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:   Carolinas Northeast Sales revenue $ 900 $ 4,200 Income 170 372 Divisional assets (beginning of year) 1,000 1,500 Current liabilities (beginning of year) 170 170 R&D expendituresa 450 370 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?

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 RAD Sales Selling, general and administrative (excluding R&D) Division Canal (5000) $4,120 20,040 60,500 12,200 50,800 4,560 Lake (5000) $9,400 29,600 398,000 31,800 190,000 7,500 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…