Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 25 percent. Selected financial information (in thousands of dollars) for the first year of business follows.
East West
Sales revenue $1,400 $5,400
Income 270 450
Investment (beginning of year) 1,900 2,400
Current liabilities (beginning of year) 220 220
R&D expenditures (note a) 500 400
A R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.
Required:
Evaluate the performance of the two divisions assuming BMI uses residual income.
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Home » Business » Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 25 percent. Selected financial information (in thousands of dollars) for the first year of business follows.