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 2 years ago

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