Homework Answers
Answer:
Sales = $21,000,000
Operating Costs = $18,000,000
Operating Income = Sales - Operating Costs
Operating Income = $21,000,000 - $18,000,000
Operating Income = $3,000,000
After Tax Operating Income = $3,000,000 * (1 – 0.25)
After Tax Operating Income = $2,250,000
Annual Dollar Cost of Capital = $14,000,000 * 8%
Annual Dollar Cost of Capital = $1,120,000
EVA = After Tax Operating Income - Annual Dollar Cost of
Capital
EVA = $2,250,000 - $1,120,000
EVA = $1,130,000
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