Question

In: Finance

A company has a market value of Debt of $5,000,000 and outstandingEquity Valued at$50,000,000....

A company has a market value of Debt of $5,000,000 and outstanding Equity Valued at $50,000,000. The company has a WACC of 10%. The company's NOPAT is $7,500,000 and its EBITDA is $8,200,000. What is the Economic Value Added (EVA) _________________

Solutions

Expert Solution

EVA = NOPAT - [ Capital employed * WACC ]

Capital EMployed = Debt + Equity

= $ 5000000 + $ 50000000

= $ 55000000

EVA = NOPAT - [ Capital employed * WACC ]

= $ 7500000 - [ $ 55000000 * 10% ]

= $ 7500000 - $ 5500000

= $ 2000000

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A company has a market value of equity of $465,710, and a market value of debt...
A company has a market value of equity of $465,710, and a market value of debt of $391,540. The company's levered cash flow (i.e. cash flow after paying all interest) is $75,795 and is distributed annually as dividends in full. The interest rate on the debt is 9.22%. You own $59,230 worth of the market value of the company's equity. Assume that the cash flow is constant in perpetuity, there are no taxes, and you can borrow at the same...
A company has a market value of equity of $465,710, and a market value of debt...
A company has a market value of equity of $465,710, and a market value of debt of $391,540. The company's levered cash flow (i.e. cash flow after paying all interest) is $75,795 and is distributed annually as dividends in full. The interest rate on the debt is 9.22%. You own $59,230 worth of the market value of the company's equity. Assume that the cash flow is constant in perpetuity, there are no taxes, and you can borrow at the same...
A company has equity with market value $100 million and debt with market value at $70
A company has equity with market value $100 million and debt with market value at $70 million. The debt pays perpetual expected coupons of $3.5 million annually.The numbers above are prior to a stock buyback being announced.The company uses some of its cash buyback stock on of $20 million. As a result of the fall in its cash, the expected coupon payment to debt reduce to $3.4 million (expected payments is the probability-weighted future coupons and the probability that in...
The company has the following market values of debt andequity:Market value of debt: $50...
The company has the following market values of debt and equity:Market value of debt: $50Market value of equity: $80Therefore, the total market value of the assets is $130.The firm has 10 shares outstanding; therefore, the current price per share is $8.The managers are considering an investment project with an initial cost of 40. They believe that the project should be worth $50.The company announces that it will issue new common stocks to obtain $40. However, due to information asymmetry between...
Perryville Corp. has an enterprise value of $50,000,000, long term debt of $8,000,000, and an under-funded...
Perryville Corp. has an enterprise value of $50,000,000, long term debt of $8,000,000, and an under-funded pension obligation of $6,000,000. If it has 1,800,000 shares outstanding (and no shares under option), please compute the intrinsic value per common share. Assume the same information as the prior problem. In addition, Perryville Corp. has 600,000 shares under option and in the money. Please use the denominator method and assume that all 600,000 options will be exercise (with no proceeds because future grants...
company A has a market value of debt equal to 50m and value of equity 50m....
company A has a market value of debt equal to 50m and value of equity 50m. assume the SML holds and has a risk premium of 6% and rf = 5%. company A has a beta of 0.8. The interest paid on debt is 15% . calculate the WACC (Appropriate discount rate)
Company P's market value of equity is $10120 million and the company has no debt. Suppose...
Company P's market value of equity is $10120 million and the company has no debt. Suppose that Company P decides to borrow $1470 million at an interest rate of 4.8% and use the proceeds to perform a share buyback. Following the debt issuance and share repurchase Company P will maintain the same dollar amount of debt in perpetuity. Without any debt Company P's cost of equity is 8.1%. The corporate tax rate is 21%. Subsequent to borrowing and repurchase of...
1a) A company has 50,000,000 shares at 10p each nominal value. It makes a 1 for...
1a) A company has 50,000,000 shares at 10p each nominal value. It makes a 1 for 5 bonus issue from its retained profits, which was £2,000,000 before the issue. Fill out the table below to reflect the accounting of the issue. Pre issue Issue Post issue Share capital £5,000,000 Retained profits £2,000,000 Total £7,000,000 1b.) A company has 50,000,000 shares at 10p each nominal value. It makes a 1 for 5 rights issue at 15p per share. Fill out the...
NC has a value of $300M. Debt has a market value of $180M and a yield...
NC has a value of $300M. Debt has a market value of $180M and a yield of 8%. Equity has a beta of 1.60. The risk-free return is 4% and the market risk premium is 10%. Tax rate is 40%. Find the weighted average cost of capital.
Problem 10 A firm has market value of equity of $10M and market value of debt...
Problem 10 A firm has market value of equity of $10M and market value of debt of $10M. Yield to maturity of its debt is 10%, while the expected return of its stock is 20%. Assume that the tax rate is 0%. The WACC is given by: A) 8% B) 12% C) 15% D) 18% E) 21%
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT