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In: Accounting

Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial....

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 $ 38,000 $ 61,000
Divisional income 7,300 7,425
Divisional investment 31,500 33,750
Current liabilities 2,600 2,400
R&D 2,600 2,600

Required:

Evaluate the performance of the two divisions assuming UEI uses economic value added (EVA). (Enter your answers in dollars rounded to 1 decimal place.)

A. EVA of Consumer _________________

B. EVA of Commercial ________________

C. Which performed better?

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Expert Solution

ekkarill92 answered 2 years ago
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