Question
Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in R&D, which is assumed
Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI 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.
Consumer | Commercial | ||||||
Sales revenue | $ | 28,000 | $ | 46,000 | |||
Divisional income | 4,930 | 5,100 | |||||
Divisional investment | 29,000 | 30,000 | |||||
Current liabilities | 1,600 | 1,400 | |||||
R&D | 1,600 | 1,600 | |||||
Required:
Evaluate the performance of the two divisions assuming UEI uses residual income. (Enter your answers in dollars rounded to 1 decimal place.)
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