Chapter 12 Problem 12-8 EVA [LO 6] Atomic Electronics is considering institutin

Chapter 12 Problem 12-8
EVA [LO 6] Atomic Electronics is considering instituting a plan
whereby managers will be evaluated and rewarded based on a measure of
economic value added (EVA). Before adopting the plan management wants
you to calculate what EVA will be in 2012 based on financial forecasts
for 2012 and prior financial data.AND SO ONResearch
and development expenditures in 2010 and 2011 were $1200000 and
$2100000 respectively. In calculating EVA prior research and
development will be capitalized and amortized assuming a three-year life
(i.e. one-third will be expensed in the year incurred and two-thirds
will be capitalized and expensed in the following two years).Requireda. Explain why it is important to capitalize research and development if managers are to be rewarded based on EVA.b. Calculate forecasted EVA for 2012.c. Will management be likely to support use of EVA as a financial performance measure?