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Exercise 14-30 (Static) Evaluating Business Units Using Economic Value Added (EVA) (LO 14-4) Back Mountain Industries (BMI) has two divisions: East and West. BMI has

Exercise 14-30 (Static) Evaluating Business Units Using Economic Value Added (EVA) (LO 14-4)

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 237 .5 435
Investment (beginning of year) 2,000 3,000
Current liabilities (beginning of year) 200 100
R&D expendituresa 500 400

aR&D is assumed to benefit two years. All R&D expenditure is made at the beginning of the first year.

Required:

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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