Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost-of-capital of 16.1%. Selected financial information (in thousands of dollars) for the first year of business follows:
|
|
East |
|
|
West |
| Sales revenue |
$ |
1,550 |
|
$ |
6,100 |
| Income |
|
310 |
|
|
500 |
| Investment (beginning of year) |
|
2,550 |
|
|
3,550 |
| Current liabilities (beginning of year) |
|
310 |
|
|
310 |
| R&D expenditures (note a) |
|
775 |
|
|
510 |
|
| 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 return on investment (ROI).
|