9.7 Pisces pic produced the following statement of financial position (balance sheet) and income statement at the end of the third year of trading:

An analysis of the underlying records reveals the following:
1 R&D costs relate to the development of a new product in the previous year. These costs are being written off over a 2-year period (starting last year). However, this is a prudent approach and the benefits are expected to last for 16 years.
2 The allowance for trade receivables (bad debts) was created this year and the amount of the provision is very high. A more realistic figure for the allowance would be £4 million.
3 Restructuring costs were incurred at the beginning of the year and are expected to provide benefits for an infinite period.
4 The business has a 7 per cent required rate of return for investors.
Required:
Calculate the EVA ® for the business for the third year of trading.

Transcribed Image Text:

Statement of financial position as at the end of the third year m ASSETS Non-current assets Property Machinery and equipment Motor vans Marketable investments Current assets Inventories Trade receivables Cash Total assets EQUITY AND LIABILITIES Equity Share capital Reserves Non-current liabilities Loan notes Current liabilities Trade payables Total equity and liabilities 40.0 80.0 18.6 9.0 147.6 45.8 64.6 1.0 111.4 259.0 80.0 36.5 116.5 80.0 62.5 259.0