# Divisional Performance Measurement Economic Value Added (part b) Example 5

### Problems with notes or lectures?

1. sorry for miscalculation in previous post
the opening cap employed in 2007 should have been 400+16+20 =436
any suggestions why he haven’t added back non cash item to opening cap empl in 2007
thanks

2. hi there
can someone explaine me why other non cash items(in year 2006) amounted to 20 m have NOT been added back to capital employed. My logic is that the opening balance of capital employed in year 2007 is 506(book value)+16(lease in 2006)+20(non cash items in 2006) = 542! not 522

• sorry for miscalculation in previous post
the opening cap employed in 2007 should have been 400+16+20 =436
any suggestions why he haven’t added back non cash item to opening cap empl in 2007
thanks

3. now I know how to do an EVA question

4. Great stuff………….EVA is way clearer now.

5. no he didn’t… check again 17th minute

6. can someone explain to me why balance sheet value for 2007 he use 506 but when 2006, he use 350? if the logic is to use the open value, isnt that 2007 balance sheet value should be 400 + 16 m capitalise lease instead of 506 + 16 m? pls help!! thanks a lot

7. i agree with adotey here, why havent we used the actual balance sheet numbers when calculating WACC, why the ideal gearing structure of 70:30?

• @meesammeesam, There is an argument for using the current capital structure (although market values – never balance sheet values).
However, the logic is that we really need the cost of future capital (not the existing – the existing capital is already invested whether good or bad) and that is why the gearing that they are aiming for is more sensible. (Also, that example was ‘stolen’ from an examiners article and he used 70:30)

8. This message appears whe I try to play these lectures:

• lectures work ok, your problem relates most likely to firewall, your home/office or internet provider firewall,

9. More clear than before on EVA. Thanks a lot!

10. The lecture so clear. thanks

11. i am just weeping… how lovely lecture this is

12. Great lecture. He has made is simpler for me.
Many thanks.

13. Great lecture!. Love it.
I however, have one question that is bordering me.
why do we use the target capital structure and not the actual/current capital structure of the entity.
Thanks.

14. is this note still applicable for December 2011 exams?

15. excellent lecture!