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I am confused, cannot understand the adjustments of CE in EVA. In Sep/Dec 2015 Q1, the answer was telling that ‘it has been assumed that no amortisation needs to be charged on the R&D costs since the product has not yet launched’. But if the product has already been launched, should the R&D costs then be adjusted back to CE? Could you teach me any other adjustment of CE in EVA calculation?
Yes it has to be added back to the CE as it adds value to the product.
See the article on EVA on the ACCA website under technical articles
Hi… Im abit confuse for this Q1 EVA adjustment as well.. stated that Debt/Equity is 100%, so in the calculation on WACC isnt it should be =(1 × 16%) , why is (1/2 × 16%) ?????? Anyone could help? Would appreciated alot if someone could help.. thks
Then I realised the R&D costs occurred during the present year. So it should be in the next year’s C.E.
@shereenyap said:
Hi… Im abit confuse for this Q1 EVA adjustment as well.. stated that Debt/Equity is 100%, so in the calculation on WACC isnt it should be =(1 × 16%) , why is (1/2 × 16%) ?????? Anyone could help? Would appreciated alot if someone could help.. thksDebt/Equity is 100% means debt divides by equity equals to 1, debt equals to equity.
so both E/(E+D) and D/(E+D) should be 1/(1+1)
i suppose your way of calculation means that the company is completed funded by equity.
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