OME STATEMENT (Figures in $ millions) Net sales $ 887.00 Cost of goods sold 747.00 Depreciation 37.00 Earnings before interest and taxes (EBIT) $ 103.00 Interest expense 18.00 Income before tax $ 85.00 Taxes 17.85 Net income $ 67.15
OME STATEMENT (Figures in $ millions) Net sales $ 887.00 Cost of goods sold 747.00 Depreciation 37.00 Earnings before interest and taxes (EBIT) $ 103.00 Interest expense 18.00 Income before tax $ 85.00 Taxes 17.85 Net income $ 67.15
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Here are simplified financial statements for Watervan Corporation:
| INCOME STATEMENT | |
| (Figures in $ millions) | |
| Net sales | $ 887.00 |
|---|---|
| Cost of goods sold | 747.00 |
| 37.00 | |
| Earnings before interest and taxes (EBIT) | $ 103.00 |
| Interest expense | 18.00 |
| Income before tax | $ 85.00 |
| Taxes | 17.85 |
| Net income | $ 67.15 |
| (Figures in $ millions) | ||
| End of Year | Start of Year | |
|---|---|---|
| Assets | ||
| Current assets | $ 375 | $ 324 |
| Long-term assets | 270 | 228 |
| Total assets | $ 645 | $ 552 |
| Liabilities and shareholders’ equity | ||
| Current liabilities | $ 200 | $ 163 |
| Long-term debt | 114 | 127 |
| Shareholders’ equity | 331 | 262 |
| Total liabilities and shareholders’ equity | $ 645 | $ 552 |
The company’s cost of capital is 8.5%.
Required:
-
Calculate Watervan’s economic value added (EVA).
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
-
What is the company’s return on capital? (Use start-of-year rather than average capital.)
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
-
What is its
return on equity ? (Use start-of-year rather than average equity.)Note: Enter your answer as a percent rounded to 2 decimal places.
-
Is the company creating value for its shareholders?
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