Economic Value Added (EVA) Assignment | Homework For You
May 28th, 2020
Here are simplified financial statements for Watervan Corporation:
Don't use plagiarized sources. Get Your Assignment on
Economic Value Added (EVA) Assignment | Homework For You
Just from $13/Page
| INCOME STATEMENT | ||
| (Figures in $ millions) | ||
| Net sales | $ | 899.00 |
| Cost of goods sold | 759.00 | |
| Depreciation | 49.00 | |
| Earnings before interest and taxes (EBIT) | $ | 91.00 |
| Interest expense | 30.00 | |
| Income before tax | $ | 61.00 |
| Taxes | 21.35 | |
| Net income | $ | 39.65 |
| BALANCE SHEET | |||||||
| (Figures in $ millions) | |||||||
| End of Year | Start of Year | ||||||
| Assets | |||||||
| Current assets | $ | 387 | $ | 348 | |||
| Long-term assets | 294 | 240 | |||||
| Total assets | $ | 681 | $ | 588 | |||
| Liabilities and shareholders’ equity | |||||||
| Current liabilities | $ | 212 | $ | 175 | |||
| Long-term debt | 126 | 139 | |||||
| Shareholders’ equity | 343 | 274 | |||||
| Total liabilities and shareholders’ equity | $ | 681 | $ | 588 | |||
The company’s cost of capital is 9%.
a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
b. What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)
d. Is the company creating value for its shareholders?
- Yes
- No. Get Finance homework help today
