Question

The following income statements and other information are available for the Cato Company:

		2020		2019		2018
Sales		$494,000,000		$325,000,000		$247,000,000
Less cost of goods sold		273,000,000		156,000,000		118,300,000
Gross margin		221,000,000		169,000,000		128,700,000
Less:
Selling and administrative costs		35,750,000		32,175,000		25,454,000
Research and development		13,260,000		16,120,000		12,285,000
Income from operations		171,990,000		120,705,000		90,961,000
Less taxes on income		34,398,000		24,141,000		18,192,200
Net income		$137,592,000		$96,564,000		$72,768,800
Total assets		$929,500,000		$864,500,000		$573,300,000
Noninterest-bearing current liabilities		18,200,000		14,690,000		12,844,000
Cost of capital		12%		12%		12%

Calculate EVA for 2020. Assume that for purposes of calculating EVA, the company capitalizes research and development expenditures and amortizes them over three years, including the year they are incurred. For external reporting purposes, research and development is expensed in the year incurred, as indicated in the income statements above. (Round answer to the nearest whole dollar, e.g. 5,725. Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)

Can someone please help me calculate this one and show the steps please?!

Answer 1

Income Statement
Particulars	Exisitng	New for EVA	Remarks
Sales	$4940,00,000	$4940,00,000
Less COGS	$2730,00,000	$2730,00,000
Gross Margin	$2210,00,000	$2210,00,000
Less:
Selling & Admin	$357,50,000	$357,50,000
Research & Devolopment	$132,60,000	$138,88,333	Working Below
Income from Operations	$1719,90,000	$1713,61,667
Less Tax on Income	$343,98,000	$342,72,333
Tax %	20%	20%
Net Income (NOPAT)	$1375,92,000	$1370,89,333
Total Asset	$9295,00,000	$9437,13,333	Working Below
Less : Non Interest Bearing Liability	$182,00,000	$182,00,000
Capital Invested	$9113,00,000	$9255,13,333
Cost of Capital	12%	12%
EVA {NOPAT - (Capital Invested x Cost of Capital)}	$282,36,000	$260,27,733
Working
Particulars	2020	2019	2018
Research & Devolopment	$132,60,000	$161,20,000	$122,85,000
Amortized
2018	$40,95,000	$40,95,000	$40,95,000
2019	$53,73,333	$53,73,333
2020	$44,20,000
Total	$138,88,333	$94,68,333	$40,95,000
Particulars	2020	Remarks
Total Assets	$9295,00,000
Add Balance of R&D Expense to amotize
2018	0
2019	$53,73,333	(16120000 x 1/3)
2020	$88,40,000	(13260000 x 2/3)
Total	14213333.33
Revised Asset	$9437,13,333