Calculate eva in their first year of operation

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Question - In their first year of operation, Barrows Australia reported end-of-period assets of 240.6 million and income of 52.1 million. The income included a charge for advertising expenses of 10.9 million. The CFO believes that advertising should be treated as investment because it increases sales not only in the current year but also in the four subsequent years (after five years the effect of advertising wears off and has no effect on future sales). The risk-adjusted cost of capital is 8%. Calculate EVA in their first year of operation using end-of-period assets (advertising expenses should be properly capitalized).

Reference no: EM133070968

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