Question

Casey Motors recently reported net income of $148 million. The firm's tax rate was 40.0% and interest expense was $46 million. The company's after-tax cost of capital is 11.0% and the firm's total investor supplied operating capital employed equals $1,036 million. What is the company's EVA? (Answers are in $ millions.)

Answer 1

$61,640,000

Step-by-step explanation:

Earning before tax:

= Net income ÷ 60%

= $148,000,000 ÷ 60%

= $246,666,667

EBIT:

= Earning before tax + Interest expense

= $246,666,667 + $46,000,000

= $292,666,667

EVA:

= EBIT(1 - t) - (Capital employed × cost of capital)

= $292,666,667(1 - 0.4) - ($1,036,000,000 × 11%)

= $175,600,000 - 113,960,000

= $61,640,000