Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division Selected financial data for the past year is shown as follows. Divisional Investment is as of the beginning of the year Colonial Pharmaceuticals uses a 9 percent cost of capital and uses beginning of the year investment when computing Roland residual income. Ignore income taxes. AC Division So Division Allocated corp. overhead S ee Cost of goods sold 3, 2ee 7, eee Divisional investment 9,000 80, R&D 2,000 3,600 Sales 8,eee 20,000 SGSA 7ee 1,539 R&D is assumed to have a two-year life in the AC Division and a nine-year life in the SO 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. (Do not round intermediate calculations.) AC Division So Division Economic value added Show transcribed image text