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Hi Sir,
I would like to understand why product development cost was not add to the calculation of NOPA in the answer.
Thank you,
LilySee the note in the answer under the EVA calculation:
“[Tutor note: ROCE figures are based on year opening figures although year closing figures are acceptable. Credit was also given if adjustment of EVA for product development costs was considered.]”
Whereas research costs would definitely have been written off in the financial statememts, it is not clear what treatment was used for development costs. They might have been capitalised and that seems to be the assumption in the calculation of EVA in the answer. The note allows for the other treatment.
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