its cost of capital to be 12% for the purpose of its performance evaluations ...
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Accounting
its cost of capital to be 12% for the purpose of its performance evaluations
| Balance Sheet |
| Income Statement |
|
| 000 | 000 |
| Non-current assets | 1,500 | Revenue 4,000 |
| Current assets | 600 | Operating costs 3,600 |
|
| 2,100 | Operating profit 400 |
| Divisional equity | 1,000 | Interest paid 70 |
| Long-term borrowings | 700 | Profit before tax 330 |
| Current liabilities | 400 |
|
|
| 2,100 |
|
For many years prior to the year ended March 2019 the annual expenditure on research and development was 200,000. Due to the launch of a new product, in the year ended March 2019 the amount was increased to 300,000. New products are expected to last four years.
For EVA calculations assume that research and development costs start to be charged in the year the investment takes place, and the EVA book value of past research and development costs was 300,000 at the beginning of 2018-19.
What is the correct Economic Value Added (EVA) for Tetra Division for the year ended 31 March 2019?
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