Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of...
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Accounting
Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information (in thousands of dollars) for the first year of business follows.
East
West
Sales revenue
$
1,000
$
5,000
Income
200
390
Investment (beginning of year)
2,000
3,000
Current liabilities (beginning of year)
200
200
R&D expendituresa
500
400
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 BMI uses economic value added (EVA). (Enter answers in thousands of dollars. Round your answers to 1 decimal place.)
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