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Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals 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: Alloys Petro Sales revenue 9,300 7,400 Divisional income 967 1,135 Divisional 7,450 investment 8,900 Current liabilities 350 390 R&D 390 490 Required: Evaluate the performance of the two divisions assuming Houghton Chemicals uses economic value added (EVA). Note: Enter your answers in thousands of dollars rounded to 1 decimal place. EVA of Alloys division EVA of Petro division Which division performed better? $ 147,500.0 $ 156,000.0 The Petro division performed better

Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals 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: Alloys Petro Sales revenue 9,300 7,400 Divisional income 967 1,135 Divisional 7,450 investment 8,900 Current liabilities 350 390 R&D 390 490 Required: Evaluate the performance of the two divisions assuming Houghton Chemicals uses economic value added (EVA). Note: Enter your answers in thousands of dollars rounded to 1 decimal place. EVA of Alloys division EVA of Petro division Which division performed better? $ 147,500.0 $ 156,000.0 The Petro division performed better

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals 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: Alloys Petro Sales revenue 9,300 7,400 Divisional income 967 1,135 Divisional 7,450 investment 8,900 Current liabilities 350 390 R&D 390 490 Required: Evaluate the performance of the two divisions assuming Houghton Chemicals uses economic value added (EVA). Note: Enter your answers in thousands of dollars rounded to 1 decimal place. EVA of Alloys division EVA of Petro division Which division performed better? $ 147,500.0 $ 156,000.0 The Petro division performed better
Transcribed Image Text:Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals 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: Alloys Petro Sales revenue 9,300 7,400 Divisional income 967 1,135 Divisional 7,450 investment 8,900 Current liabilities 350 390 R&D 390 490 Required: Evaluate the performance of the two divisions assuming Houghton Chemicals uses economic value added (EVA). Note: Enter your answers in thousands of dollars rounded to 1 decimal place. EVA of Alloys division EVA of Petro division Which division performed better? $ 147,500.0 $ 156,000.0 The Petro division performed better
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