Book value: Marketible securities: 50,000 Non-operating long-term assets: 20,000 Cash: 130,000 Accounts receivable: 200,000 Inventory: 100,0
Book value:
Marketible securities:
50,000
Non-operating long-term assets:
20,000
Cash:
130,000
Accounts receivable:
200,000
Inventory:
100,000
Operating long-term assets:
800,000
Accounts payable:
178,000
Accrued taxes:
100,000
Short-term debt:
120,000
Long-term debt:
Par value per bond:
1,000
Number of bonds:
550
Total book value, long-term debt:
550,000
Common stock:
Par value per share: 10
Number of shares: 35,200 352,000
Total book value, common stock:
Market value:
Marketible securities:
50,000
Non-operating long-term assets:
25,000
Short-term debt:
120,000
Long-term debt:
Market value per bond 950
Common stock:
Market value per share 13.50
Other data:
WACCcomp
0.10
Revenue
500,000
Fixed costs
40,000
Variable costs as a % of revenue
0.50
Depreciation
55,000
Corporate tax rate
0.40
What is the economic value added (EVA) based on operating capital?
a. $2,000
b. -$2,200*
c. -$2,300
d. $1,500
Homework Answers
EVA = Net Operating Profit After Tax - (Capital Invested x WACC)
As shown in the formula, there are three components necessary to solve EVA: net operating profit after tax (NOPAT), invested capital, and the weighted average cost of capital (WACC) operating profit after taxes (NOPAT) can be calculated, but can usually be easily found on the corporation's income statement.
The next component, capital invested, is the amount of money used to fund a particular project. We will also need to calculate the weighted-average cost of capital(WACC) if the information is not provided.
The idea behind multiplying WACC and capital investment is to assess a charge for using the invested capital. This charge is the amount that investors as a group need to make their investment worthwhile.
Net Operating Profit After Tax=93000
Capital Invested=902000
EVA = Net Operating Profit After Tax - (Capital Invested x WACC)
=$93000-$90200
=$2800
Add Answer to:
Book value:
Marketible securities:
50,000
Non-operating long-term assets:
20,000
Cash:
130,000
Accounts receivable:
200,000
Inventory:
100,0
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