EVA® NOPAT and EVA® Capital: Financing Approach Refer to Problem 19-44 for reported financial statement data for Nimrod, Inc.
Required
1. Prepare, using the financing approach, an estimate of EVA® NOPAT. In addition to the above data, you discover the following: increase during the year of the LIFO reserve, $2; imputed interest expense on noncapitalized leases, $4; and increase in deferred tax liability during the year, $5. (Hint: The correct answer is $53.) What is the rationale for the various adjustments you made to the company’s reported income statement?
2. Prepare, using the financing approach, an estimate of EVA® capital. (Hint: The correct answer is $925.) In addition to the above information, you note the following: end-of-year value of the LIFO reserve, $10; and present value of noncapitalized leases, $50. What is the rationale for the adjustments you made to reported balance sheet amounts in order to estimate EVA® capital?
3. Given the company’s WACC, what is the estimated EVA® for the year? How do you interpret this figure?
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