Barton Industries has operating income for the year of $3,700,000 and a 25% tax rate. Its total invested capital is $18,000,000

Question

3 years ago

6

and its after-tax percentage cost of capital is 5%. What is the firm's EVA? Round your answer to the nearest dollar, if necessary.

1 answer:

rusak2 [61] · Answer 1 · 2022-01-13T12:11:42+03:00

Answer:

1,875,000 Economic Value Added

Explanation:

Net Operating Profit After Taxes - Invested Capital x Weighted Average Cost of Capital = Economic Value added

This represent the return on the shareholders after their investment return is paid. It is the value generated from the investent resources.

3,700,000 x ( 1- 0.25 ) = 2,775,000 Operating Income after taxes

18,000,000 x 5% = (900,000) Required Return

1,875,000 Economic Value Added