All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian’s $400 million debt is 9 percent, and the company’s tax rate is 30 percent. The cost of All-Canadian’s equity capital is 12 percent. Moreover, the market value of the company’s equity is $600 million. (The book value of All-Canadian’s equity is $430 million, but that amount does not reflect the current value of the company’s assets or the value of intangible assets.)The following data (in millions) pertain to All-Canadian’s three divisions.Compute the economic value added (or EVA) for each of the company's three divisions. (Do not round intermediate calculations. Enter your final answers in dollars and not millions.) **All-Canadian's Three Divisions Financial Data**Below is an overview of financial data, measured in millions, related to the three divisions of All-Canadian.| **Division** | **Before-Tax Operating Income** | **Current Liabilities** | **Total Assets** ||--------------|----------------------------------|--------------------------|------------------|| Pacific | $14 | $6 | $70 || Plains | $45 | $5 | $300 || Atlantic | $48 | $9 | $480 |- **Pacific Division:** - **Before-Tax Operating Income:** $14 million - **Current Liabilities:** $6 million - **Total Assets:** $70 million- **Plains Division:** - **Before-Tax Operating Income:** $45 million - **Current Liabilities:** $5 million - **Total Assets:** $300 million- **Atlantic Division:** - **Before-Tax Operating Income:** $48 million - **Current Liabilities:** $9 million - **Total Assets:** $480 millionThis table provides a snapshot of the financial performance and standing of each division in terms of income, liabilities, and total assets. These figures can help in assessing the profitability and fiscal health of each division.

Here, Given Information Cost of Equity Capital =12% Market Value of Equity =$600million Cost of Debt…

Answered: All-Canadian, Ltd. is a multiproduct…

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter17: Financial Statement Analysis

Section17.4: Analyzing Financial Statements Using Financial Ratios

Problem 1WT

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All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian’s $400 million debt is 9 percent, and the company’s tax rate is 30 percent. The cost of All-Canadian’s equity capital is 12 percent. Moreover, the market value of the company’s equity is $600 million. (The book value of All-Canadian’s equity is $430 million, but that amount does not reflect the current value of the company’s assets or the value of intangible assets.)

The following data (in millions) pertain to All-Canadian’s three divisions.

Compute the economic value added (or EVA) for each of the company's three divisions. (Do not round intermediate calculations. Enter your final answers in dollars and not millions.)

**All-Canadian's Three Divisions Financial Data**

Below is an overview of financial data, measured in millions, related to the three divisions of All-Canadian.

| **Division** | **Before-Tax Operating Income** | **Current Liabilities** | **Total Assets** |
|--------------|----------------------------------|--------------------------|------------------|
| Pacific | $14 | $6 | $70 |
| Plains | $45 | $5 | $300 |
| Atlantic | $48 | $9 | $480 |

- **Pacific Division:**
- **Before-Tax Operating Income:** $14 million
- **Current Liabilities:** $6 million
- **Total Assets:** $70 million

- **Plains Division:**
- **Before-Tax Operating Income:** $45 million
- **Current Liabilities:** $5 million
- **Total Assets:** $300 million

- **Atlantic Division:**
- **Before-Tax Operating Income:** $48 million
- **Current Liabilities:** $9 million
- **Total Assets:** $480 million

This table provides a snapshot of the financial performance and standing of each division in terms of income, liabilities, and total assets. These figures can help in assessing the profitability and fiscal health of each division.

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