Normandy Instruments Invests heavily In research and development $($R&D$),$ although it must currently treat its R&D expenditures as expenses for financlal accounting purposes. To encourage Investment In R&D$,$ Normandy evaluates its divislon managers using EVA. The company adjusts accounting Income for R&D expenditures by assuming these expenditures create assets with a two$-$year llfe. That is$,$ the R&D expendltures are capitalized and then amortized over two years.

Aerospace Divislon of Normandy shows after$-$tax Income of $$18\mathrm{.}006$ million for year $2.$ R&D expenditures In year $1$ amounted to $$7\mathrm{.}206$ milllon and In year $2,$ R&D expendltures were $$12\mathrm{.}006$ millilon. For purposes of computing EVA, Normandy assumes all R&D expendltures are made unlformly over the year. Before adjusting for R&D$,$ Aerospace Division shows assets of $$72\mathrm{.}006$ million at the beginning of year $2$ and current llabllitles of $$1,506,000.$ Normandy computes EVA using divislonal Investment at the beginning of the year and a $12$ percent cost of capltal.

Required:

Compute EVA for Aerospace Dlvislon for year $2.$

Note: Enter your answers In dollars, not in millions.

$\backslash$table$[[$justed divisional income,$$,126],[$st of adjusted divisional investment,,$26],[$onomic value added $($EVA$),$$$,46]]$