Question

Economic Value Added Falconer Company had net (after-tax) income last year of $13,241,678 and total capital employed of $118,459,240. Falconer's actual cost of capital was 9%. Required: 1. Calculate the EVA for Falconer Company. Enter negative values as negative numbers, if required. Round your answer to the nearest dollar.

Answer 1

$2,580,346.40

Step-by-step explanation:

The computation of the economic value added is shown below:

As we know that

Economic value added is

= Net after tax income - Total Capital employed × Cost of capital

= $13,241,678 - $118,459,240 × 9%

= $13,241,678 - $10,661,331.60

= $2,580,346.40

We simply applied the above formula so that the economic value added could arrive