Exercise 12-13 The following income statements and other information are availab

Question

Exercise 12-13

The following income statements and other information are available for the Schneider Company:

Calculate EVA for 2014. Assume that for purposes of calculating EVA, the company capitalizes research and development expenditures and amortizes them over three years, including the year they are incurred. For external reporting purposes, research and development is expensed in the year incurred, as indicated in the income statements above. (Round answer to the nearest whole dollar, e.g. 5,725.)

2014 2013 2012 Sales $387,900,000 $243,600,000 $192,900,000 Less cost of goods sold 213,345,000 116,928,000 92,592,000 Gross margin 174,555,000 126,672,000 100,308,000 Less:       Selling and administrative costs 27,153,000 24,360,000 19,290,000       Research and development 15,516,000 12,180,000 9,645,000 Income from operations 131,886,000 90,132,000 71,373,000 Less taxes on income 39,565,800 27,039,600 21,411,900 Net income $92,320,200 $63,092,400 $49,961,100 Total assets $711,300,000 $669,800,000 $439,000,000 Noninterest-bearing current liabilities 137,100,000 11,080,000 98,090,000 Cost of capital 12% 12% 12%

Explanation / Answer

EVA 2014 = Net operating profit wafter taxes - ( Invested capital X Cost of Capital )

= $92,320,200 - ( $574,200,000 X 12%)

= $ 92,320,200 - $ 68,904,000

= $ 23,416,200

Net operating profit = Net income = $ 92,320,200

Invested Capital = Total Asset - Non interest bearing current liabilities = $711,300,000-$137,100,000=$574,200,000

Cost of capital = 12%

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