The table below shows a condensed income statement and balance sheet for Androscoggin Copper’s Rumford smelting plant (figures in $ millions). Assume the cost of capital is 10%.
|Income Statement for 2018||Assets, December 31, 2018|
|Revenue||$||56.96||Net working capital||$||7.05|
|Raw materials cost||18.69|
|Operating cost||21.06||Investment in plant and equipment||69.63|
|Depreciation||4.47||Less accumulated depreciation||21.04|
|Pretax income||$||12.74||Net plant and equipment||$||48.59|
|Tax at 21%||2.68|
|Net income||$||10.06||Total assets||$||55.64|
a. Calculate the plant’s EVA. (Enter your answer in millions rounded to 2 decimal places.)
b. As the table above shows, the plant is carried on Androscoggin’s books at $48.59 million. However, it is a modern design, and could be sold to another copper company for $98 million. How should this fact change your calculation of EVA? (Negative answers should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places.)
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