The company's cost of capital is 8.5%. a. Calculate Watervan's economic value added (EVA) b. what is the company's return on capital? (use start-of-year rather than average capital) c. what is its return on equity? (use start-of-year rather than average equity.) d. is the company creating value for its shareholders?
Class book: Fundamentals of
Measuring Performance. Here are simplified financial statements for Watervan Corporation:
Income Statement (Figures in $ millions) |
Net Sales $880 Cost of goods sold 741 Earnings before interest and taxes (EBIT) 109 Interest expense 12 Income before taxes 97 Taxes 20 Net Income 77 |
(Figures in $ millions) |
End of Year Start of Year |
Assets Current assets $369 $312 Long-term assets 258 222 Total Assets $627 $534 Liabilities and shareholders' equity Current liabilities $194 $157 Long-term debt 108 121 Shareholders' equity 325 256 Total liabilities and shareholders' equity $627 $534 |
The company's cost of capital is 8.5%.
a. Calculate Watervan's economic value added (EVA)
b. what is the company's return on capital? (use start-of-year rather than average capital)
c. what is its
d. is the company creating value for its shareholders?
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