17.0k views
0 votes
Question 3: Economic value-added (EVA) Net operating profit before taxes is $1,800. Total assets (invested capital) are $8,500, and current liabilities are $1,100. The weighted average cost of capital (WACC) is 11%. The tax rate is 20%. Compute the economic value added (EVA). NOPAT = $ Incorrect: Your answer is incorrect. EVA = $ Incorrect: Your answer is incorrect. (if you get a negative number, enter it with a minus sign, i.e., -100 not ($100))

User Asherber
by
8.0k points

1 Answer

5 votes

Answer:

- $454

Step-by-step explanation:

Net Operating Profit after tax = Net operating profit before tax - tax rate

= $1,800 - 20%

= $360

Economic Value Added:

= Net Operating Profit after tax - (Capital Invested × Weighted average cost of capital )

= $360 - [($8,500 - $1,100) × 11%]

= $360 - ($7,400 × 11%)

= $360 - $814

= - $454

User Srikar Kulkarni
by
8.4k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories