Answer: $400,000
Explanation: Given the following :
Operating Income (EBIT) = $4,000,000
Weighted average cost of Capital (WACC) = 10% = 0.1
Operating capital = $20,000,000
Taxes = 40% = 0.4
Economic Value Added (EVA) is given by;
EBIT x (1-Tax) - (WACC x Operating capital)
$4,000,000 × (1-0.4) - (0.1 × 20,000,000)
$4,000,000 × (0.6) - (2,000,000)
$2400,000 - $2,000,000
=$400,000
