EVA. Links Company produces golf clubs and other sporting goods accessories. The following information is for each division at Links for the most recent fiscal year.
To calculate EVA, the management requires adjustments for R&D and noninterest bearing current liabilities as outlined in the following. Research and development will be capitalized and amortized over several years resulting in an increase to average operating assets of $400,000 for the Golf division and $650,000 for the Sporting Goods division. On the income statement, R&D expense for the year will be added back to operating income; then R&D amortization expense for one year will be deducted. The current year amortization expense will total $100,000 for the Golf division and $150,000 for the Sporting Goods division. Noninterest bearing liabilities will be deducted from average operating assets.
Required: Calculate EVA for each division and comment on your results.