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S Problem 14-50 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) 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 RSD) Economic value added Division Canal (5000) $ 4,170 20, 140 61,500 12, 700 52,800 4,710 Canal 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. Lake (3000) $ 8,900 28,600 393,000 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 Division 31,300 140,000 7,300

S Problem 14-50 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) 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 RSD) Economic value added Division Canal (5000) $ 4,170 20, 140 61,500 12, 700 52,800 4,710 Canal 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. Lake (3000) $ 8,900 28,600 393,000 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 Division 31,300 140,000 7,300

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 13E: The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as...
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S Problem 14-50 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) 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 RSD) Economic value added Division Canal (5000) $ 4,170 20, 140 61,500 12, 700 52,800 4,710 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. Canal Division 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) $ 8,900 28,600 393, 000 31,300 140,000 7,300 Lake Division Drou EE!! Mut
Transcribed Image Text:S Problem 14-50 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) 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 RSD) Economic value added Division Canal (5000) $ 4,170 20, 140 61,500 12, 700 52,800 4,710 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. Canal Division 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) $ 8,900 28,600 393, 000 31,300 140,000 7,300 Lake Division Drou EE!! Mut
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