Economic value added?????

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 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. AC Division Allocated corp. overhead Cost of goods sold Divisional investment sO Division $1,550 5,000 77,500 3,600 17,500 625 3,250 9,500 2, 250 9,000 R&D Sales SG&A 775 1,280 R&D is assumed to have a two-year life in the AC Division and a nine-year life in the S0 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

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 8 percent cost of capital and uses beginning-of-the year investment when computing ROI and residual income. Ignore income taxes. Allocated corp. overhead Cost of goods sold Divisional investment R&D Sales SGRA AC Division $ 625 3,250 9,500 2,250 9,800 775 So Division $ 1.550 5.ee 77,500 3.600 17,500 1,280 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: o. Compute EVA for the two divisions (Do not round intermediate calculations.) AC Division SO Division Economic value added