6 12.5 points Bisbee Health Products Invests heavily in research and development (R&D), although it must currently treat Its R&D expenditures as expenses for financial accounting purposes. To encourage Investment in R&D, Bisbee evaluates its division managers using EVA. The company adjusts accounting Income for R&D expenditures by assuming these expenditures create assets with a two-year life. That is, the R&D expenditures are capitalized and then amortized over two years. Western Division of Bisbee shows after-tax Income of $7.5 million for year 2 R&D expenditures In year 1 amounted to $3.6 million and In year 2, R&D expenditures were $4.6 million. For purposes of computing EVA, Bisbee assumes all R&D expenditures are made at the beginning of the year. Before adjusting for R&D, Western Division shows assets of $39.8 million at the beginning of year 2 and current liabilities of $700,000. Bisbee computes EVA using divisional Investment at the beginning of the year and a 14 percent cost of capital. eBook Print Required: Compute EVA for Western Division for year 2. (Enter your answers in dollars, not in millions.) References Adjusted divisional income Cost of adjusted divisional investment Economic value added (EVA)