The following income statements and other information are available for the Schn

Question

The following income statements and other information are available for the Schneider Company:

Calculate EVA for 2014. Assume that for purposes of calculating EVA, the company capitalizes research and development expenditures and amortizes them over three years, including the year they are incurred. For external reporting purposes, research and development is expensed in the year incurred, as indicated in the income statements above. (Round answer to the nearest whole dollar, e.g. 5,725.)

2014 2013 2012 Sales $384,800,000 $258,000,000 $191,800,000 Less cost of goods sold 211,640,000 123,840,000 92,064,000 Gross margin 173,160,000 134,160,000 99,736,000 Less:       Selling and administrative costs 26,936,000 25,800,000 19,180,000       Research and development 15,392,000 12,900,000 9,590,000 Income from operations 130,832,000 95,460,000 70,966,000 Less taxes on income 39,249,600 28,638,000 21,289,800 Net income $91,582,400 $66,822,000 $49,676,200 Total assets $718,000,000 $663,100,000 $438,700,000 Noninterest-bearing current liabilities 135,900,000 11,270,000 98,070,000 Cost of capital 12% 12% 12%

Explanation / Answer

EVA= Net operating profit after tax- Capital Invested*WACC R& D expenditure 2012 2013 2014 Income Effect               9,590,000             12,900,000         15,392,000     15,392,000 amortize for 2012              -3,196,667              -3,196,667          -3,196,667      -3,196,667 amortize for 2013              -4,300,000          -4,300,000      -4,300,000 amortize for 2014          -5,130,667      -5,130,667 Assets Balance                            -                 4,300,000         10,261,333       2,764,667 Net Operating Profit after Tax 91582400+2764667*(1-0.3)=                                  93,517,667 Capital Invested       718,000,000 Cost of capital % 12.0% Cost of Capital         86,160,000 EVA 93517667-86160000=           7,357,667

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