Question

Estimate a firm’s economic value added (EVA) if EBIT is $600,000, amount of financial capital is $1,600,000, WACC is 19.0% and tax rate is 30%.

$103,000

$62,000

$65,000

$116,000

$89,000

Answer 1

  

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EVA = Net Operating income after taxes - WACC * Capital Employed

= EBIT * (1-0.30) - 19% * 1,600,000

= 600,000  * (1-0.30) - 19% * 1,600,000

= 420000 - 304000

= 116000

Option D is correct.   

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