What is the following company's EVA?  The figures are in millions of dollars,  The company’s WACC is 8%.

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
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What is the following company's EVA? 
The figures are in millions of dollars, 

The company’s WACC is 8%.

 

 

Balance sheet
Cash
Other current assets
Non current assets
Total assets
Income statement
Operating income
Interest payment
Income before taxes
Taxes
Net income
5000 Current liabilities
10000 Long-term debt
60000
75000 Equity
5000
500
4500
900
3600
10000
35000
30000
Transcribed Image Text:Balance sheet Cash Other current assets Non current assets Total assets Income statement Operating income Interest payment Income before taxes Taxes Net income 5000 Current liabilities 10000 Long-term debt 60000 75000 Equity 5000 500 4500 900 3600 10000 35000 30000
Expert Solution
Step 1

WACC = 8%

To compute EVA (Economic value added)

 

EVA = NOPAT – (WACC x Capital employed)

NOPAT = Net Operating profit after tax

 

Tax rate = (900/ 4500) x 100

Tax rate = 20%

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