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Dear sir ,
I have 2 questions.A: In the calculation of Eva , i dont understand why the doubtful debt value of 2 is added back ?
The kaplan exam text says always add the increase in provisions from previous years .
In the question 2011 provision is 0.5 and 2012 is 2 , while note 4 states the provision in the Sofp 2012 is 4.5.
So what increase should we add back now ?B: Kaplan text states always deduct the amortisation of R&D costs from profits.
Here on question note 5 clearly states that R&D expense has 5 years time , so why we aint adding back the amortisation of 5 years ?This year’s charge is 2 so must be added back to NOPAT.
The provision at the end of the year is 4.5, so must have been 2.5 [4.5 – 2] at the start of the year. The capital employed should be at the start of the year.
All of the R&D has been charged, so should be added back. The project will be developed over the next 5 years, so amortisation would not happen until the project was complete. Anyhow, we are not told what charge for amortisation should be made – if any.
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