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PatriciaA

Vyaderm Pharmaceuticals

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PatriciaA

Vyaderm Pharmaceuticals is considering introducing economic value added as its prime instrument for bonus and incentive decision-making criteria. For the purpose of NOPAT, four pertinent adjustments are to be made in operating earnings. However, due to these adjustments, the management is unsure about the bonus for the years 2000 and 2001. After the adjustments, the calculations show that the EVA of the North American dermatology division for the year 2000 comes out to be $116,081,929. The bonus for the same year is $395,994. The EVA performance is negative for the year 2001; therefore, no bonus is paid in that year. At the current moment, the company should restrain from EVA as a bonus calculation criterion.

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