Question

Lasky Manufacturing has two divisions: Carolinas and Northeast. Lashy hos a cost of copital of 75 percent. Selected financial Information (in thousands of dollars) for the first year of business follows: aR8D is assumed to benefit two periods. All R&D is spent at the beginning of the year. R

Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA)

Answer 1

Without specific financial data from Lasky Manufacturing, an EVA calculation cannot be accurately completed. EVA measures a division's financial performance by deducting the cost of capital from its operating profit.

Step-by-step explanation:

The student's question pertains to the evaluation of the performance of two divisions of Lasky Manufacturing using Economic Value Added (EVA). EVA is a measure of a company's financial performance based on the residual wealth calculated by deducting the cost of capital from its operating profit. To calculate EVA, the Net Operating Profit After Taxes (NOPAT) of each division must be determined, and then the capital charge, which is the cost of capital times the capital invested in each division, must be subtracted from NOPAT.

While the question provides background information on other companies' R&D and social benefits, it does not offer the specific numbers needed to calculate EVA for Lasky Manufacturing. Therefore, we would need the NOPAT, capital invested, and precise R&D expenses of Lasky Manufacturing's divisions to provide a direct answer. This method provides insights into each division's profitability and efficiency in generating returns above the firm's cost of capital, ultimately reflecting their economic contribution to the company.