Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are bas

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Colonial Pharmaceuticals Is A Small Firm Specializing In New Products It Is Organized Into Two Divisions Which Are Bas 1 (41.63 KiB) Viewed 48 times

Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore Income taxes. Allocated corp. overhead Cost of coods sold Divisional Investment RLD Sales GRA AC Division $ 605 3,210 9, 100 2,050 8,200 715 so Division $1,750 6,960 79,500 3,600 19,500 1,480 R&D is assumed to have a two-year life in the AC Division and a nine year life in the SO division. All R&D expenditures are spent at the beginning of the year. Assume there are no current liabilities and ſurrealistically that no R&D investments had taken place before this year Required: a. Compute EVA for the two divisions. (Do not round Intermediate calculations.) AC Division SO Division Economic value added V