Division D operates as on investment centre. The book value of the non-current assets is $ 83,000

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Division D operates as on investment centre. The book value of the non-current assets is $ 83,000 but their replacement value is estimated to be $ 98,000. Working capital in the division has a value of $ 19,000.

Latest operating profits for the division were $ 18,500 after charging historical cost depreciation of $ 8,100 and the cost of a major advertising campaign which amounted to $ 6,000. The advertising campaign is expected to boost revenues for two years.

An economic depreciation charge for the period 12,300.

The risk adjusted weighted cost of capital for the company is 11% per annum.

Required : Calculate the EVA for Division D. Ignore taxation.

Posted Date: May 13, 2024 12:32 AM

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Division D operates as on investment centre. The book value of the non-current assets is $ 83,000

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Calculating EVA for Division D Step 1 Calculate Operating Profit After Tax NOPAT NOPAT Operating Pro... View the full answer

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