9.7 Pisces plc produced the following balance sheet and income statement at the end of the third year of trading:

Balance sheet as at the end of the third year

£m £m Non-current assets Goodwill 40.0 Machinery and equipment 80.0 Motor vans 18.6 Marketable investments 9.0 147.6 Current assets Inventory 45.8 Receivables 64.6 Cash 1.0 111.4 Current liabilities Trade payables (62.5)

48.9 196.5 Non-current liabilities Loan capital (80.0)

116.5 Equity Share capital 80.0 Reserves 36.5 116.5 Income statement for the third year £m £m Sales revenue 231.5 Cost of sales (143.2)
Gross profit 88.3 Wages (33.5)
Depreciation of machinery and equipment (14.8)
Goodwill written off (10.0)
Research and development costs (40.0)
Provision for doubtful debts (10.5) (108.8)
Operating loss (20.5)
Income from investments 0.6 (19.9)
Interest payable (0.8)
Ordinary loss before taxation (20.7)
Restructuring costs (6.0)
Profit before taxation (26.7)
Corporation tax –
Loss after tax (26.7)
An analysis of the underlying records reveals the following:
1 Goodwill was purchased during the first year of trading when an existing business was acquired. The goodwill cost £70.0m and this amount is being written off over a seven-year period (starting in the first year of the business).
2 R&D costs relate to the development of a new product in the previous year. These costs are written off over a two-year period (starting last year). However, this is a prudent approach and the benefits are expected to last for 16 years.
3 The provision for doubtful debts was created this year and the amount of the provision is very high. A more realistic figure for the provision would be £4.0m.
4 Restructuring costs were incurred at the beginning of the year and are expected to provide benefits for an infinite period.
5 The business has an 8 per cent required rate of return for investors.
Required:
Calculate the EVA® for the business for the third year of trading.