eva and r&d

[h21]

i am so confused, why decreasing r&d expense would lower NOPAT, if NOPAT is EBIT(1-t), ebit should be higher when r&d is lower?

 

[Gigaloo]

R&D costs are added back to NOPAT when calculating EVA. Hence lower r&d expense implies lower amount added back and therefore it NOPAT is lower.

 

[tau281290]

Gigaloo wrote:
R&D costs are added back to NOPAT when calculating EVA. Hence lower r&d expense implies lower amount added back and therefore it NOPAT is lower.

For real? never seen this before? which part of the textbook?

 

[Gigaloo]

I donot remeber seeing this in the text book either. I was doing CFAI topic test in the morning and found a similar question, this was in the explaination.

 

[abeshak sindhi]

Gigaloo wrote:
I donot remeber seeing this in the text book either. I was doing CFAI topic test in the morning and found a similar question, this was in the explaination.

this is under residual income chapter in starting 3-4 pages.

 

[h21]

abeshak sindhi wrote:

Gigaloo wrote:
I donot remeber seeing this in the text book either. I was doing CFAI topic test in the morning and found a similar question, this was in the explaination.

this is under residual income chapter in starting 3-4 pages.

can you explain that to me, from the formula, EBIT = Sales-COGS-SG&A, SG&A includes D&A right?