Your colleague argues that R&D for ResearchCo should be capitalized and amortized. If R&D is capitalized, what is the starting R&D asset, investment in R&D, amortization of R&D, and ending R&D asset by year? Use straight-line amortization over three years, with the first amortization charge deducted the following year.
Answer to relevant QuestionsUse the R&D capitalization table developed in Question 2 to modify NOPLAT and invested capital from Question 1. What is the ROIC on yearend capital by year? How does this compare to the ROIC computed in Question 1? Explain how an increase in inflation affects a company’s tax shields from depreciation and the resulting impact on the company’s value. Are there conditions under which you should consider using a local market risk premium and a local beta estimate for a valuation rather than a global risk premium and beta? It is often argued that the two most important real options available to a manager evaluating investment decisions are the option to defer an investment decision and the option to abandon an investment decision. Explain the ...Describe the benefits of a scenarioDCFvaluation model. What factors should be considered when constructing scenario parameters?
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