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Hello Mr Gromit,
Computation of EVA
Assuming we have non-cash expense of $12m for 2008 and 2009(current year), should we add $12m to the capital employed of the current year?
If YES, is this because of $12m non cash expense of 2008 or its because of the current year?
Yes, if the cash expense were not there the CE would be $12 greater.
When doing the EVA for 2009 you use the CE at the start of that year, so what you are adding back to CE is the $12M that was charged in 2008.
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