Question

Barton Industries has operating income for the year of $3,700,000 and a 36% tax rate. Its total invested capital is $20,000,000 and its after-tax percentage cost of capital is 6%. What is the firm's EVA?

Answer 1

$1,168,000

Step-by-step explanation:

The computation of the economic value added is shown below:

Economic value added = NOPAT - total invested capital × WACC

where,

NOPAT = Operating income × (1 - tax rate)

= $3,700,000 × (1 - 0.36)

= $2,368,000

And, the other values would remain same

All other information which is given is not relevant. Hence, ignored it

= $2,368,000 - $20,000,000 × 6%

= $2,368,000 - $1,200,000

= $1,168,000