Casey Motors recently reported net income of $118 million. The firm's tax rate was 40 percent,...
Casey Motors recently reported net income of $118 million. The firm's tax rate was 40 percent, and interest expense was $40 million. The company's after-tax cost of capital is 13 percent, and the firm's total investor supplied operating capital employed equals $826 million. What is the company's EVA? (Answers are in $ millions.)
| $196.67 |
| $118.00 |
| $34.62 |
| $142.00 |
| $107.38 |
Homework Answers
EBIT = [Net Income / (1 - t)] + Interest
= [$118M / (1 - 0.40)] + $40M
= $196.67M + $40M = $236.67M
NOPAT = EBIT x (1 - t) = $236.67M x (1 - 0.40) = $142M
EVA = NOPAT - [(A-T cost of capital) x (Operating Capital)]
= $142M - [0.13 x $826M] = $142M - $107.38M = $34.62M
Hence, Option "C" is correct.
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Casey Motors recently reported net income of $118 million. The
firm's tax rate was 40 percent,...
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