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kodGreya [7K]
3 years ago
14

10. HHH Inc. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of invest

or-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year?
Business
1 answer:
kakasveta [241]3 years ago
3 0

Answer:

Explanation:

Economic value added=NOPAT-(CAPITAL * WACC)

NOPAT=(SALE - OPERATING COST)(1-TAX SALE)

=($12500 - $7025)(1 - 0.40)

-5475*0.60

=$3285

EVA = $3285 - (18750 * 9.5%)

= $3285 - %1781.25

=$1503.75

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