FIN704 GDB 1 Solution and discussion
Total Marks 10
Starting Date Monday, January 13, 2020
Closing Date Friday, January 17, 2020
Question Title EVA (Economic Value Added)
Topic for Discussion: “EVA (Economic Value Added)”
To assess the knowledge related to the EVA To understand the importance of EVA for management accountant/consultant To know the significance of EVA in investment decisions To assess investment opportunity via EVA and make decision
ABT Ltd. – located in SDIE industrial area, is one of the renowned pharmaceutical companies in the country. The company is progressing by leaps and bounds. It has a wide range of medical healthcare product line. Currently, it is planning to add a cough syrup with the brand name of “ABT Cough Relief” in its product line and hopeful this project would create value addition in the net worth of its shareholders. The project requires net investment on training and R&D as Rs. 7.50 million and Rs. 23 million respectively, whereas Rs. 310 million and Rs. 22.70 million are estimated for fixed assets and cost of trademark. The project is expected to generate net operating profit after tax (NOPAT) as Rs. 60 million which is 9.92% of the sales. Further, weighted average cost of capital is 11.20%.
Being a student of Managerial Accounting, you are required to calculate net investment, EVA (Economic Value Added) and comment with four valid reasons (not more than 50 words) why or why not ABT Ltd. invest in this project?
Carefully review your GDB before submission as it cannot be replaced once it is submitted. Your discussion must be based on logical aspects of the topic requirements with proper justification. Use the font style “Times New Roman” and font size “12”. Your answer should be relevant to the topic i.e. clear and concise. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course. Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references. You should post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed. Obnoxious or ignoble answer should be strictly avoided. You cannot participate in the discussion after the due date via email. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over. For planning your semester activities in an organized manner, you are advised to view schedule of upcoming Assignments, Quizzes and GDBs in the overview tab of the course website on VULMS. As you know that load shedding problem is also prevailing in our country. Keeping in view the fact, you are advised to submit your GDB well before time without waiting for the due date. For your convenience; you have been communicated so that you can manage your activities, therefore no excuse will be entertained after due date of GDB.