Calculate the Economic Value Added (EVA) for a project with $1,000,000 in capital invested where the...
Calculate the Economic Value Added (EVA) for a project with $1,000,000 in capital invested where the Return on Capital is 16% and the Cost of Capital is 8%
Homework Answers
ANSWER:
Nopat = return on capital * capital invested = 16% * $1,000,000 = $160,000
cost of capital = 8%
capital = $1,000,000
EVA = Nopat - (cost of capital * capital)
EVA = $160,000 - (8% * $1,000,000)
EVA = $160,000 - $80,000
EVA = $80,000
hence the economic value added is $80,000
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