QUESTION 30

1. Which of the following items would not be a required adjustment when using economic value added (EVA)?

   	A.	Research & development costs - to be added to capital (assets)
   	B.	Research & development costs - to be added to income.
   	C.	Interest expense - to be subtracted from income.
   	D.	Current liabilities - to be subtracted from capital.

1 points

QUESTION 31

1. Back Mountain Industries' East Division has a cost of capital of 20 percent. Selected financial information (in thousands of dollars) for the first year of the division follows.

   	East
   Sales revenue	$	3,000
   Income		550
   Investment (beginning of year)		1,500
   Current liabilities (beginning of year)		300
   R&D (research and development) expendituresa		1,200

   ^aR&D is assumed to benefit three years. All R&D is spent at the beginning of the year.

   EVA (economic value added) of the East Division is:

   	A.	$550
   	B.	$870
   	C.	$1,110
   	D.	$250