CLAD Corp Inc. reported the following: Sales $15,000 Op Costs (including depreciation) $6,000 Op Income (EBIT)...

CLAD Corp Inc. reported the following:
Sales	$15,000
Op Costs (including depreciation)	$6,000
Op Income (EBIT)	$9,000

WACC	10.00%
Tax Rate	40%
Investor-supplied capital	$20,000

What is the Economic Value Added (EVA)?

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Expert Solution

Formula for Economic Value Added(EVA) = NOPAT - (WACC*Capital Invested)

Given:

EBIT = 9000

Tax = 40%

NOPAT = EBIT*(1 - Tax rate)

NOPAT = 9000*(1 - 0.4) = 5400

WACC = 10%

Capital Invested = 20000

So, putting the values in EVA formula,

EVA = 5400 - (0.1*20000)

EVA = 5400 - 2000

EVA = 3400

So, Economic Value Added(EVA) = $3400

jeff jeffy answered 2 years ago

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