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

Expert Solution

NOPAT = Net Operating Profit after Tax
NOPAT = (Net Income+Tax+Interest+Non operating gain /loss) * (1-tax rate)

= ($1.5+0.5+2)*0.75
= $3 million

EVA = NOPAT - (WACC*Capital Invested)
= $3 - ($11*10%)
= $3- $1.1
= $1.9 million

jeff jeffy answered 3 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.

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?

Projects SS and LL have the cash flows shown below. If a 10% cost of capital...

Projects SS and LL have the cash flows shown below. If a 10% cost of capital is appropriate for both of them, what are their NPVs? 0 1 2 3 SS -700 500 300 100 LL -700 100 300 600 What project or set of projects would be in your capital budget if SS and LL were independent?

Meyer Inc’s total invested capital is $676,000, and its total debt outstanding is $185,000. The new...

Meyer Inc’s total invested capital is $676,000, and its total debt outstanding is $185,000. The new CFO wants to establish a total debt to total capital ratio of 25%. The size of the firm will not change. How much debt must the company add or subtract to achieve the target debt to capital ratio?

10. The Nolan Corporation finds it is necessary to determine its marginal cost of capital. Nolan’s...

10. The Nolan Corporation finds it is necessary to determine its marginal cost of capital. Nolan’s current capital structure calls for 30 percent debt, 30 percent preferred stock, and 40 percent common equity. Initially, common equity will be in the form of retained earnings (Ke) and then new common stock (Kn). The costs of the various sources of financing are as follows: debt, 8.5 percent; preferred stock, 6 percent; retained earnings, 12 percent; and new common stock, 13.2 percent. a....

Compton Corporation currently has no debt in its capital structure. As an unlevered firm, its cost...

Compton Corporation currently has no debt in its capital structure. As an unlevered firm, its cost of equity is 13 percent. It is considering substituting $8,000 in debt at 6 percent interest. The EBIT for the firm is $5,000 under either scenario, and the tax rate is 35 percent. Unlevered Firm Levered Firm EBIT $5000 $5000 Interest 0 480 EBT 5000 4520 Taxes (.35) 1750 1582 Net Income 3250 2938 c. Calculate the cost of equity and the WACC for...

Jark Corporation has invested in a machine that cost $75,000, that has a useful life of...

Jark Corporation has invested in a machine that cost $75,000, that has a useful life of six years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of four years. Given these data, the simple rate of return on the machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.) Garrison 16e...

Given: Verizon Total cost = $23 billion Opportunity cost of capital = 10% Annual cost =...

Given: Verizon Total cost = $23 billion Opportunity cost of capital = 10% Annual cost = $2.3 billion Expected demand = q = 2,100,000 – 6P AT&T Total cost = $4.6 billion Opportunity cost of capital = 10% Annual cost = $460 million Expected demand = q = 425,000 – 60P 1. Calculate the expected annual profit that Verizon will earn if they price at service at $30/month, $60/month or $100/month. At which price do they maximize profit? 2. Calculate...

ABCO is a conglomerate that has ksh4 billion in common stock. Its capital is invested in...

ABCO is a conglomerate that has ksh4 billion in common stock. Its capital is invested in four subsidiaries: Entertainment (ENT), Consumer products (CON), Pharmaceuticals (PHA) and insurance (INS). The four subsidiaries are expected to perform differently, depending on the economic environment as follows: Investment in ksh millions Poor economy Average economy Good economy ENT 1,200 20% -5% -8% CON 800 15% 10% -20% PHA 1,400 -10% -5% 27% INS 600 -10% 10% 10% Assuming that the three economic outcomes (1)...

Its cost of capital is 10 percent. What is the project’s payback period?

A project has the following cash flows: Project Year Cash Flow 0 -$3,000 1 1,000 2 1,000 3 1,357.51 4 1,000 Its cost of capital is 10 percent. What is the project’s payback period?

Question