Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions...

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Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows: Sales revenue Divisional income Divisional investment Current liabilities Alloys $ 8,500 887 6,650 270 R&D Required: Petro $ 6,600 1,055 8,100 310 310 410 Evaluate the performance of the two divisions assuming Houghton Chemicals uses residual income. Note: Enter your answers in thousands of dollars rounded to 1 decimal place. Residual Income of Alloys division Residual Income of Petro division Which division performed better? Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows: Sales revenue Divisional income Divisional investment Current liabilities Alloys $ 8,500 887 6,650 270 R&D Required: Petro $ 6,600 1,055 8,100 310 310 410 Evaluate the performance of the two divisions assuming Houghton Chemicals uses residual income. Note: Enter your answers in thousands of dollars rounded to 1 decimal place. Residual Income of Alloys division Residual Income of Petro division Which division performed better?

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To evaluate the performance of the two divisions using residual income well first ca... View the full answer