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Search Jesse Ble Document1 - Word Layout References Mailings Review View Help 29. Economic Value Added (EVA), Tech LLC sells

Sales Division Services Division Income statement Sales Cost of sales Gross margin Allocated overhead (from corporate) Market

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Answer #1

Economic Value Added (EVA)=

(Return on Operating Capital-Cost of Capital) x Operating Capital

Workings are attached in Notes i.e. Return on Operating capital is calculated in Note 3, Operating capital is calculated in Note 2 and Revised Income Statement is calculated in Note 1.

Sales Division:

EVA= (20-10)% of $ 720000

=10% 0f 720000

=$ 72000

Service Division:

EVA= (22.1-10)% of $ 505000

=12.1% of 505000

=$ 61105

Nole 1: Renised Income Statement : Sales Division Sernice Division : Sales lost of Sales $ 900 000 - 490.000 $ 700 000 399.00Operating Capital Average Openating Asset - _Non Interest bearing Cunent liabilities Sales Dirision Service Diuision Average

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