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Prahm and Associates had EBIT of $5M last year. The firm carried an average debt of...

Prahm and Associates had EBIT of $5M last year. The firm carried an average debt of $15M during the year on which it paid 8% interest. The company paid no dividends and sold no new stock. At the beginning of the year it had equity of $17M. The tax rate is 40%, and Prahm's cost of capital is 11%. Calculate Prahm's EVA during the year and comment on that performance relative to ROE. Make your calculations using average balances in the capital accounts.

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