A division has a reported annual profit of $\$ 27 \mathrm{~m}$. This was after charging $\$ 6 \mathrm{~m}$ for the development and launch costs of a new product which is expected to have a life of 3 years.

The division has a risk adjusted cost of capital of $10 \%$ per annum, but it has a large bank loan, which incurs annual interest charges of $8 \%$.

The net book value of the division's net assets is $\$ 85 \mathrm{~m}$. The replacement cost of the assets is estimated to be $\$ 96 \mathrm{~m}$.

Ignore the effects of taxation. The Division's EVA is:

Transcribed Image Text:

$m