- Theoperatingincomeisadjustedbyaddingbackthe
current year’s R&D expense and subtract ing the
amortization of the research asset.
To getto the after-tax operating income, we also
considerthe taxbenefits from expensingR&D (as
opposed to just the amortization of the research
asset).
- The current year’s R&D expense is added to the
capitalexpendituresfortheyear,andtheamortization
is added to the depreciation to estimate adjusted
values.Inconjunctionwithan decreasein working
capital of $19.43 million,we estimate an adjusted
reinvestment rate for the firm of 57.42%.
- Toestimate thereturnoncapital, weestimatedthe
valueoftheresearchassetattheendoftheprevious
yearandaddedittothebookvalueofequity.The
resultant return on capital for the firm is shown.
