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 $$7\mathrm{.}5$ million for year $2.$ R&D expenditures in year $1$ amounted to $$3$ million and in year $2,$ R&D expenditures were $$4\mathrm{.}8$ million. For purposes of computing EVA, Bisbee assumes all R&D expenditures are made at the beginning of the year. Before adjusting for R&D$,$ Western Division shows assets of $$30$ million at the beginning of year $2$ and current liabilities of $$600,000.$ Bisbee computes EVA using divisional investment at the beginning of the year and a $14$ percent cost of capital.

Required

Compute EVA for Western Division for year $2.$