The following income statements and other information are available for the Uli
ID: 2581745 • Letter: T
Question
The following income statements and other information are available for the Uli Company:
Calculate EVA for 2017. Assume that for purposes of calculating EVA, the company capitalizes research and development expenditures and amortizes them over 3 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. Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)
Explanation / Answer
EVA = Net operating profit after tax - Cost of equity capital Sales 371881000 Net income 88507678 Equity Capital 686278000 - 13168400 = 673109600 Cost of Capital 673109600 x 12% = 80773152 EVA 88507678 - 80773152 = 7734526
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