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Calculating EVA Brewster Company manufactures elderberry wine. Last year, Brewster earned operating income of $185,000 after

3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering sell

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Answer #1

3.

NOPAT = 380000

WACC = 0.7*17% + 0.3*4.2% = 13.16%

EVA (original data) = 380000- (3700000*13.16%) = -106920

Revised data:

  • EVA first year = 380000-(15%*0.7 + 4.2%*0.3)*3700000= -55120
  • EVA Second year = 380000-(12%*0.7 + 4.2%*0.3)*3700000= 22580.
EVA
YEAR 1 -106920
YEAR 2 -55120
YEAR 3 +22580

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