Paula Boothe, president of the Bramble Corporation, has mandated a minimum 8% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 10%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 12% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,816,000 in a new line of energy drinks that is expected to generate $319,000 in operating income. Assume that Monty Corporation's actual weighted average cost of capital is 10% and its tax rate is 30%.
Paula Boothe, president of the Bramble Corporation, has mandated a minimum 8% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves leaves all investment decisions to the divisional managers as long as they anticipate a minimum
Calculate the economic value added of the proposed new line of energy drinks.
Economic value added $______________
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