Question

Barton Industries has operating income for the year of $3,100,000 and a 38% tax rate. Its total invested capital is $20,000,000 and its after-tax percentage cost of capital is 5%. What is the firm's EVA

Answer 1

Answer:

$922,000

Explanation:

Operating income after tax = $3,100,000 - ($3,100,000 × 38%) = $1,922,000

Annual cost of dollar = 20,000,000 × 5% = 1,000,000

EVA = Operating income after tax - Annual cost of dollar = 1,922,000 - 1,000,000 = $922,000