Youlett Packard Corporation (YPC) is a multinational computer hardware, software and services corporation. The company invests considerable amounts in research and development each year. In the most recent fiscal year 2012, the R&D expense was $1,020. The pre-tax operating income for YPC was $3,000m and the book value of capital was $5,000m. The R&D expenses for the prior 5 years are as follows: $950 (2011), $940 (2010), $930 (2009), $920 (2008), $910 (2007). The effective tax rate is 40%.

(a). Assuming an amortizable life of 5 years, determine the amortization of capitalised R&D in each of the previous 5 years (5 marks).

(b). Determine the Value of Research Asset for YPC and the R&D amortization expense for the current year (2 marks).

(c). Compute the Return on Capital (ROC) for YPC before and after capitalising the R&D expenses (3 marks)