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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