Briggs & Stratton Corporation is the world’s largest maker of air-cooled gasoline engines for outdoor power equipment. The company’s engines are used by the lawn and garden equipment industry. According to the MD&A in the 2011 annual report, “Management believes that the value of Briggs & Stratton is enhanced if the capital invested in the company’s operations yields a cash return that is greater than the cost of capital.” The following data are from Briggs & Stratton’s 2011 annual report (thousands of dollars):

Dividends paid were $.44 in both 2010 and 2011. There were no share repurchases in 2010 or 2011.
1. Comment on the statement from the 10-K relative to the concept of EVA and in light of the data provided. What additional information would be required to actually evaluate EVA for Briggs and Stratton?
2. Did Briggs & Stratton’s overall performance improve from 2010 to 2011? Explain your assessment of the change in performance and relate it to the concept of favorable or unfavorableEVA.

  • CreatedFebruary 20, 2015
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