Question

Home Depot entered fiscal 2016 with a total capitalization of $27.273 millon In 2016, debt investors received interest income of $850 million. Net income to shareholders was $6.405 million. (Assume a tax rate of 35%) Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Economic value added million
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Solution -

Economic value added- interest income net of tax + net income - (cost of capital*total capitalisation)

Economic value added= 850*(1-0.35) + 6405 - (10%*27,273)

Economic value added= $552.50+$6405 -$2,727.30

Economic value added= $4,230.20


answered by: ANURANJAN SARSAM
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