Bayes Ltd 2020 2021 '000s 3250 500 Operating profit Interest expenses Profit before tax Tax at 25% Profit after tax '000s 2750 450 2300 575 1725 2750 688 2063 Further information is as follows: 1. The allowance for doubtful debts was $150,000 at 1 January 2020, $125,000 at 31 December 2020 and $175,000 at 31 December 2021. 2. Research and development costs of $250,000 were incurred during each of the years 2020 and 2021 on Project BAT. These costs were expensed in the income statement, as they did not meet the requirements of financial reporting standards for capitalisation. Project BAT is not complete yet and it unclear whether it will be successful 3. The company incurred non-cash expenses of $7500 in both years (7,500 in 2020 and 2021 combined). 4. Capital employed (equity plus debt) per the statement of financial position was 33,500,000 at 1 January 2020, $16,750,000 at 31 December 2020, and $18,500,000 at 31 December 2021 5. The cost of debt was 6% in each year. The estimated cost of equity was 10% in 2020 and 15% in 2021. The rate of corporation tax was 25% during both years. 6. The company's capital structure was 70% equity and 30% debt each year. 7. There were no provisions for deferred tax. Calculate Economic Value Added for 2020 and 2021 Calculate Residual Income for 2020 and 2021 Discuss the relative merits of each of these as a performance measure Bayes Ltd 2020 2021 '000s 3250 500 Operating profit Interest expenses Profit before tax Tax at 25% Profit after tax '000s 2750 450 2300 575 1725 2750 688 2063 Further information is as follows: 1. The allowance for doubtful debts was $150,000 at 1 January 2020, $125,000 at 31 December 2020 and $175,000 at 31 December 2021. 2. Research and development costs of $250,000 were incurred during each of the years 2020 and 2021 on Project BAT. These costs were expensed in the income statement, as they did not meet the requirements of financial reporting standards for capitalisation. Project BAT is not complete yet and it unclear whether it will be successful 3. The company incurred non-cash expenses of $7500 in both years (7,500 in 2020 and 2021 combined). 4. Capital employed (equity plus debt) per the statement of financial position was 33,500,000 at 1 January 2020, $16,750,000 at 31 December 2020, and $18,500,000 at 31 December 2021 5. The cost of debt was 6% in each year. The estimated cost of equity was 10% in 2020 and 15% in 2021. The rate of corporation tax was 25% during both years. 6. The company's capital structure was 70% equity and 30% debt each year. 7. There were no provisions for deferred tax. Calculate Economic Value Added for 2020 and 2021 Calculate Residual Income for 2020 and 2021 Discuss the relative merits of each of these as a performance measure