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Adjusted Divisional Income is NOT 20,415,000 I've entered that answer twice and the system says it is wrong. Not sure what im doing wrong Normandy
Adjusted Divisional Income is NOT 20,415,000
I've entered that answer twice and the system says it is wrong.
Not sure what im doing wrong
Normandy Instruments 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, Normandy 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. Aerospace Division of Normandy shows after-tax income of $18.015 million for year 2. R\&D expenditures in year 1 amounted to $7.215 million and in year 2, R\&D expenditures were \$12.015 million. For purposes of computing EVA, Normandy assumes all R\&D expenditures are made uniformly over the year. Before adjusting for R\&D, Aerospace Division shows assets of $72.015 million at the beginning of year 2 and current liabilities of $1,515,000. Normandy computes EVA using divisional investment at the beginning of the year and a 12 percent cost of capital. Required: Compute EVA for Aerospace Division for year 2. Note: Enter your answers in dollars, not in millions. Normandy Instruments 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, Normandy 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. Aerospace Division of Normandy shows after-tax income of $18.015 million for year 2. R\&D expenditures in year 1 amounted to $7.215 million and in year 2, R\&D expenditures were \$12.015 million. For purposes of computing EVA, Normandy assumes all R\&D expenditures are made uniformly over the year. Before adjusting for R\&D, Aerospace Division shows assets of $72.015 million at the beginning of year 2 and current liabilities of $1,515,000. Normandy computes EVA using divisional investment at the beginning of the year and a 12 percent cost of capital. Required: Compute EVA for Aerospace Division for year 2. Note: Enter your answers in dollars, not in millionsStep by Step Solution
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