Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales...

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Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales Cost of The companys cost of capital is 8.5%. a. Calculate Watervans economic value added (EVA) (Do not round Intermediate calculat

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Answer 1

Answer #1

Solution:

a.	Economic value added	40.625	Million
b.	Return on capital	18.53	%
c.	Return on equity	20.19	%
d.	is the company creating value for its shareholders ?	Yes

Working:

	Tax Rate [14.49/69*100]	21.00%
a.	Economic value added	(26(1-0.21))+54.51-(0.085(135+270))	Million
b.	Return on capital	((26(1-0.21))+54.51)/(135+270)100	%
c.	Return on equity	54.51/270*100	%
d.	is the company creating value for its shareholders ?	Yes

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Answer 2

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