- This topic has 3 replies, 3 voices, and was last updated 6 years ago by
.
- Posts
Dear tutor,
I have calculated the NOPAT to this question as follows:
Profit After Tax……………………. 35.5
Add: interest net of tax…………..17.25 (23 x 75%)
Adjustments:
Dep’n……………………………………..59
Economic dep’n………………………(83)
Provision…………………………………2
R&D………………………………………..12
Non Cash…………………………………7NOPAT = 49.75
The ACCA solution however has NOPAT at 50.25. Can you explain what did I do wrong?
It is the deferred tax of 0.5.
The answer starts with PBT and takes off tax paid of 9
You start with PAT, which already has 9.5 tax deducted from it.
EVA doesn’t like provisions and non-cash movements (too arbitrary), so would concentrate on tax paid rather than charged.
Hi Ken
From the same question please
Why do we not capitalise the R&D 12M? and include therefore 2 figures for this:
1. NOPAT 2.4M amortization (being 12M over 5 years and this the charge for 1 year amortization)
2. Economic Cap Employed : 12M included then reduced for 1 year amortisation i.e. 10.6M at year end, as we are meant to capitalise future building expense under EVA??Doesn’t seem to be any reference to this in answers. was it included in the question as a trick, or am I missing something? Many thanks
Update
As i read it again closer I notice it reads “project will be developed over 5 years and is expected to be of long-term benefit to company”
So I guess my useful life of 5 years is wrong as it doesn’t specify how many years it will last for (instead 5 years is how many years work they will put into it) .. so can we capitalize the 12M anyway in Econ CE?
- You must be logged in to reply to this topic.