Question

Question 3: Economic value-added (EVA) Net operating profit before taxes is $1,800. Total assets (invested capital) are $8,500, and current liabilities are $1,100. The weighted average cost of capital (WACC) is 11%. The tax rate is 20%. Compute the economic value added (EVA). NOPAT = $ Incorrect: Your answer is incorrect. EVA = $ Incorrect: Your answer is incorrect. (if you get a negative number, enter it with a minus sign, i.e., -100 not ($100))

Answer 1

Answer:

- $454

Explanation:

Net Operating Profit after tax = Net operating profit before tax - tax rate

                                                  = $1,800 - 20%

                                                  = $360

Economic Value Added:

= Net Operating Profit after tax - (Capital Invested × Weighted average cost of capital )

= $360 - [($8,500 - $1,100) × 11%]

= $360 - ($7,400 × 11%)

= $360 - $814

= - $454