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MaRussiya [10]
3 years ago
7

Your venture has net income of $600,000 taxable income of $1,000,000 operating profit of $1,200,000 total financial capital incl

uding both debt and equity of $9,000,000 a tax rate of 40%, and a WACC of 10%. What is your venture’s EVA?
Business
1 answer:
Butoxors [25]3 years ago
3 0

Answer:

EVA = -$180,000

Explanation:

given data

net income = $600,000

taxable income of $1,000,000

operating profit = $1,200,000

total financial capital = $9,000,000

tax rate = 40%

WACC = 10%

solution

we get here EVA that is express as

EVA = NOPAT - Invested Capital × WACC   ..................1

and here

NOPAT = EBIT × ( 1 - Tax Rate )  .........2

put here value

NOPAT = operating profit × (1 - Tax Rate)  

NOPAT =$1,200,000 × (1 - 0.40)  

NOPAT =$720,000

so put in equation 1 we get

EVA = NOPAT - Invested Capital × WACC

EVA = $720,000 - $9,000,000 × 10%

EVA = -$180,000

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