(Answered) Question washington company has two divisions the adams

Accounting

Question: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results:

Adams Division Jefferson Divison

Net (after-tax) income $ 605,000 $ 315,000

Total capital employed 4,000,000 3,250,000

Washington's actual cost of capital was 12 percent.

Economic Value Added Refer to the information for Washington Company above.

Required: 1. Calculate the EVA for the Adams Division.

2. Calculate the EVA for the Jefferson Division.

3. Conceptual Connection: Is each division creating or destroying wealth?

4. Conceptual Connection: Describe generally the types of actions that Washington's management team could take to increase Jefferson Division's EVA?

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