Oscar Lewitt, CEO of Ingram Carparation, had just read in a recent issue of Fortone magazine an aticle entitled "America's Wealth Creators" and noticed several names of corporations be was familiar with, such as Microsoft, General Electric, Intel, Walmart, Coca- Cola, Merck, znd Pfizar. These top wealth creators were listed in terms of their market value added (MVA) and economic value added (EVA). Although he knew that some of the MVA and EVA were in the billions of dollars, he noticed in the article two other mmbars, return on capital and cost of capital. He falt that if these corporations, despite thair size, were able to figure out how much vahne they ware adding to the wealth of their shareholders, it would be possible to calculate the EVA for Ingram Corporation. At his next management committee meeting, Mr. Lewitt asked his controller to calculate the EVA for Ingram Corparation and to report the information to the management committee at their next meeting for discussion purposes. After some research about this new financial technique, the controller knew that he had to refer to his financial statements to calculate the EVA. He had to draw several numbers from the statement of income and the statement of financial position to determine the cost of capital and ROA. The company's most recent statement of income and different sources of financing are shown below: Ingram Corporation Statement of Income For the year ended December 31, 2014
Oscar Lewitt, CEO of Ingram Carparation, had just read in a recent issue of Fortone magazine an aticle entitled "America's Wealth Creators" and noticed several names of corporations be was familiar with, such as Microsoft, General Electric, Intel, Walmart, Coca- Cola, Merck, znd Pfizar. These top wealth creators were listed in terms of their market value added (MVA) and economic value added (EVA). Although he knew that some of the MVA and EVA were in the billions of dollars, he noticed in the article two other mmbars, return on capital and cost of capital. He falt that if these corporations, despite thair size, were able to figure out how much vahne they ware adding to the wealth of their shareholders, it would be possible to calculate the EVA for Ingram Corporation. At his next management committee meeting, Mr. Lewitt asked his controller to calculate the EVA for Ingram Corparation and to report the information to the management committee at their next meeting for discussion purposes. After some research about this new financial technique, the controller knew that he had to refer to his financial statements to calculate the EVA. He had to draw several numbers from the statement of income and the statement of financial position to determine the cost of capital and ROA. The company's most recent statement of income and different sources of financing are shown below: Ingram Corporation Statement of Income For the year ended December 31, 2014
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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