Cosenza Company has $20 million in total invested operating capital, and its WACC is 10%. Cosenza...

Cosenza Company has $20 million in total invested operating capital, and its WACC is 10%. Cosenza has also sales of $10 million, Operating costs of $6 million, interest expenses of $2 million, and tax rate of 30 percent. What is Cosenza's EVA? What is the net income of the company?

Expert Solution

EVA = NOPAT - Invested capital * WACC

NOPAT = (Revenues - Operating costs) * (1 - Tax rate)

= (10 Million - 6 Million)*(1 - 0.30)

= 2.80 Million

EVA = 2.80 Million - 20 Million * 0.10

= 2.80 Million - 2.00 Million

= 0.80 Million

Or 800,000

Net Income = (Sales - Operating costs - Interest expense) * (1 - Tax rate)

= (10000000 - 6000000 - 2000000) * (1 - 0.30)

= 1400000

jeff jeffy answered 2 years ago

5) Scranton Shipyards has $11.0 million in total invested operating capital, and its Cost of capital...

5) Scranton Shipyards has $11.0 million in total invested operating capital, and its Cost of capital is 10%. Scranton has the following income statement: Sales $10.0 million (EBIT) $ 4.0 million Interest expense 2.0 million (EBT) $ 2.0 million Taxes (25%) 0.5 million Net income $ 1.5 million What is Scranton’s EVA? Explain what does it mean.

SS corporation has $11M in total invested capital and its cost of capital is 10%. This...

SS corporation has $11M in total invested capital and its cost of capital is 10%. This is the company income statement: Sales $10M EBIT $4M Interest Expenses $2M EBT $2M Taxes (25%) $0.5M Net Income $1.5M Calculate EVA

1. A country has $20 million of domestic investment and net capital outflow of $10 million....

1. A country has $20 million of domestic investment and net capital outflow of $10 million. What is saving? show work 2. If a dollar currently purchases 10 pesos and someone forecasts that in a year it will be 11 pesos, then the forecast is given in nominal terms and implies the dollar will _____appreciate____________(Appreciate/Depreciate). 3. A U.S. purchase of oil from overseas paid for with foreign currency it already owned _________(increases/decreases) U.S. net exports, and ______________(increases/decreases) U.S. net capital...

If a truck company ABC has an initial capital outlay of $22,500, WACC of 10%, and...

If a truck company ABC has an initial capital outlay of $22,500, WACC of 10%, and the following 5 possible cash flow patterns, depending upon the number of years it operates its truck business, If operating for only one year: CF0 = -22500, CF1 = 23750 If operating for 2 years: CF0 = -22500, CF1 = 6250, CF2 = 20250 If 3 years: CF0 = -22500, CF1 = 6250, CF2 = 6250, CF3 = 17250 If 4 years: CF0 =...

LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding...

LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding bonds have a 12 percent coupon, paid semiannually, a current maturity of 17 years, and sell for $1,162. It has 100,000 bonds outstanding. The firm can issue new 20-year maturity semiannual bonds at par but will incur flotation costs of $50 per bond (Hint: the coupon rate on the new bonds = the YTM on existing bonds). The firm could sell, at par, $100...

Sand Key Development Company has a capital structure consisting of $20 million of 10% debt and $30 million of common equity.

Sand Key Development Company has a capital structure consisting of $20 million of 10% debt and $30 million of common equity. The firm has 500,000 shares of common stock outstanding. Sand Key is planning a major expansion and will need to raise $15 million. The firm must decide whether to finance the expansion with debt or equity. If equity financing is selected, common stock will be sold at $75 per share. If debt financing is chosen, 6% coupon bonds will...

A firm has a total debt of 10 million, and equity of 15 million. The company...

A firm has a total debt of 10 million, and equity of 15 million. The company pays 8% interest on the debt and return on equity is 14%. If the tax rate of the company is 35%, calculate the cost of capital for the company?

Tartan Industries currently has total capital equal to $10 million, has zero debt, is in the...

Tartan Industries currently has total capital equal to $10 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $4 million, and distributes 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 3% per year, 340,000 shares of stock are outstanding, and the current WACC is 13.30%. The company is considering a recapitalization where it will issue $3 million in debt and use the proceeds to...

Lipscomb Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...

Lipscomb Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for 1,000 USD. The firm could sell, at par, 100 USD preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would be incurred. Libscomb is a constant-growth firm which just paid a dividend of...

Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...

Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sells for $1,100. The firm could sell, at par, $100 preferred stock which pays a 4.89 percent annual dividend, but flotation costs of 5 percent would be incurred. Preston's beta is 1.2, the risk-free rate is 3 percent, and the market...

Question