Question

In: Accounting

Calculate EVA from the following data. 2018 2019 Operating Income $ 35,058 $ 42,959 Research 14,726 &n

Calculate EVA from the following data.

	2018	2019
Operating Income	$ 35,058	$ 42,959
Research	14,726	16,876
Depreciation, Amortization, Other	10,261	11,682
Accum. Depreciation	29,223	35,330
Accum. Amortization	6,500	7,000
Tax Rate	20%	10%
Cash	133,768	133,819
Debt	76,240	72,178
Equity	82,718	102,330
Required Return (WACC)	9%	9%

NOPAT	?	?
Investment	?	?
EVA	?	?

EVA is:
a. 41,228
b. 48,036
c. 75,639
d. 14,726

Expert Solution

Step : 1

Calcualtion of NOPAT for 2018

The calculation for NOPAT is NOPAT = Operating profit x (1 - Tax Rate)

= 35,058*(1-0.2))

= 28,046.4

NOPAT for 2018 is 28,046.4

Calcualtion of NOPAT for 2019

The calculation for NOPAT is NOPAT = Operating profit x (1 - Tax Rate)

= 42,959*(1-0.1))

= 38,663.1

NOPAT for 2019 is 38,663.1

Step : 2

Calculation of Investment for 2018:

The calculation of investment =(equity+debt)-non operating assets

= (82,718+76,240) - 158958

= 25,190

Investment calculatuion for 2018 is 25190

Calculation of Investment for 2019:

The calculation of investment =(equity+debt) - non operating assets

= (102,330+72,178) - 13,3819

= 40,689

Investment calculatuion for 2019 is 40689

Step :3

Calculation of EVA for 2018:

The calculation of EVA = NOPAT - (WACC*Capital Invested)

= 28,046.4 - (0.09*25,190)

= 28,046.4 - 2,267.1

= 25,779.3

EVP for 2018 is 25,779.3

Calculation of EVA for 2019:

The calculation of EVA = NOPAT - (WACC*Capital Invested)

=38,663.1 -(0.09*40689)

= 38663.1 - 3,662.01

= 35,001.09

EVP for 2019 is 35,001.09

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