Lincoln Company paid $8 million cash for research and development. EVA capital was computed as $20 million. Lincoln Company cost of capital was 15%. To add economic value to the firm, Lincoln Company must generate revenues less operating costs of at least:

Question

Quizplus · Accepted Answer

To add economic value, the company must cover the cost of capital on its EVA capital. 15% of $20 million is $3 million. Adding the $8 million R&D cost, the total is $11 million.

Lincoln Company Paid $8 Million Cash for Research and Development