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Economic value added

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Economic value added

  • This topic has 2 replies, 2 voices, and was last updated 6 years ago by John Moffat.
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  • March 9, 2016 at 9:06 am #304659
    hermine
    Member
    • Topics: 26
    • Replies: 34
    • ☆☆

    HAV Co June 13
    The premium payable on acquisition should be based on the present value to infinity of the after tax excess earnings the company has generated in the past three years over the average return on capital employed.

    I calculated EVA=average net operating profit after tax – return on capital employedxaverage capital employed, then discounted it.

    Within the answer it calculated by using earnings before tax, after calculating EVA, then it applies the taxation.

    Which one is correct?
    I think my calculations are more correct.

    March 9, 2016 at 9:25 am #304668
    hermine
    Member
    • Topics: 26
    • Replies: 34
    • ☆☆

    Dear John,

    Don’t waste time answering this question. I understand the reason. The return on capital employed is given pre-tax.)))

    March 9, 2016 at 9:53 am #304681
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    Correct 🙂

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