d 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: Sales revenue Divisional income Divisional investment Current liabilities R&D Alloys $ 8,200 857 380 280 LE Petro $ 6,300 1,025 7,800 280 6,350 240 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 $ 154.1 x EVA of Petro division $ 189.0 x Which division performed better? The Petro division performed better

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d
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:
Sales revenue
Divisional income
Divisional investment
Current liabilities
R&D
Alloys
$ 8,200
857
380
280
LE
Petro
$ 6,300
1,025
7,800
280
6,350
240
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
$
154.1 x
EVA of Petro division
$
189.0 x
Which division performed better?
The Petro division performed better
Transcribed Image Text:d 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: Sales revenue Divisional income Divisional investment Current liabilities R&D Alloys $ 8,200 857 380 280 LE Petro $ 6,300 1,025 7,800 280 6,350 240 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 $ 154.1 x EVA of Petro division $ 189.0 x Which division performed better? The Petro division performed better
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