VYADERM PHARMACEUTICALS
CASE
THE EVA PROGRAM
BY: PAVILION
2016
, Question:
1) Compute the year 2000 EVA for the North American Dermatology Division.
2) Compute the year 2000 EVA bonus payout for a manager earning $200,000, assuming that
the manager’s bonus is based 100% on the division’s EVA.
3) Compute the year 2001 EVA and estimated bonus payout for the same manager, assuming
that Vyaderm profits fall back to historical levels and the EVA improvement goal remains
constant.
4) Based on your analysis, what is your recommendation for the company?
Solution:
In 1990, Vyaderm was organized geographically; its subsidiary was incorporated in 10 countries
outside United State. In United State it has a 5 business units. Every business has its own profit
and loss statement however there was no capital change for Asset on the business unit’s balance
sheet. In other words many businesses have not complete balance sheet. There was too much
cash tied in the business. When business is matured product become commodities and margin
began to decline.
In 1998 when Vyaderm began to thinking about EVA introduction, he wanted to organize a
product goal with 100% base of the bonuses of 1000 managers on corporation of EVA. However
this proposal ran into strong resistance from the business units. The divisional manager wants to
maintain the performance measure that they could control more directly.
CASE
THE EVA PROGRAM
BY: PAVILION
2016
, Question:
1) Compute the year 2000 EVA for the North American Dermatology Division.
2) Compute the year 2000 EVA bonus payout for a manager earning $200,000, assuming that
the manager’s bonus is based 100% on the division’s EVA.
3) Compute the year 2001 EVA and estimated bonus payout for the same manager, assuming
that Vyaderm profits fall back to historical levels and the EVA improvement goal remains
constant.
4) Based on your analysis, what is your recommendation for the company?
Solution:
In 1990, Vyaderm was organized geographically; its subsidiary was incorporated in 10 countries
outside United State. In United State it has a 5 business units. Every business has its own profit
and loss statement however there was no capital change for Asset on the business unit’s balance
sheet. In other words many businesses have not complete balance sheet. There was too much
cash tied in the business. When business is matured product become commodities and margin
began to decline.
In 1998 when Vyaderm began to thinking about EVA introduction, he wanted to organize a
product goal with 100% base of the bonuses of 1000 managers on corporation of EVA. However
this proposal ran into strong resistance from the business units. The divisional manager wants to
maintain the performance measure that they could control more directly.
