Question
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)
EVA of Consumer _______________
EVA of Commercial ______________
***Note: Answers are not 5972.2 and 5827.7
Solutions
Expert Solution
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| Universal Electronics, Inc. | |||
| EVA= NOPAT- (WACC* capital invested) | Consumer | Commercial | Note |
| Divisional income | 7,300.00 | 7,425.00 | J |
| Divisional investment | 31,500.00 | 33,750.00 | See B |
| Less: | |||
| Current liabilities | 2,600.00 | 2,400.00 | |
| R&D | 2,600.00 | 2,400.00 | |
| Capital invested | 26,300.00 | 28,950.00 | |
| Cost of capital | 11.00% | 11.00% | K |
| WACC* capital invested | 2,893.00 | 3,184.50 | L=B*K |
| Economic value added | 4,407.00 | 4,240.5 | M=J-L |
| Rank | 1 | 2 |
ekkarill92 answered 1 year agoRelated Solutions
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