reas carefully, question has already been answered incorrectly.

identify:

1. adjusted divisional income

2. cost of adjusted divisional investment

3. economic value Added (EVA)

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 aftr 4x income of $18.011 million for year 2. R\&D expenditures in year 1 amounted to $7.211 million and in year 2 R\&D expenditures we 211 million. For purposes of computing EVA. Normandy assumes all R8D expenditures are made uniformly over the year Before adjusting for R\&D. Aerospace. Division shows assets of $72.011 million at the beginning of year 2 and current liabilities of $1.511,000. 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 ife. That is, the R\&D expenditures are capitalized and then amortized over two years. Aerospace Division of Normandy shows after-tax income of $18.011 million for year 2 R\&D expenditures in year 1 amounted to $7211 million and in year 2. R\&D expenditures were \$12.011 million. For purposes of computing EVA, Normandy assumes all R8D expenditures are made uniformly over the year. Before adjusting for R\&D. Aerospace Division shows assets of S72.OIt mition at the beginning of year 2 and current liabilities of $1.511,000. 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