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?

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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

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