Question

Garringer Glove is an old family-operated business. Current management is concerned that the company is beginning to lose its competitive advantage and fears that the company may encounter significant business challenges in the future. The company’s controller has prepared the following data for use in the calculation of the economic value added (EVA) measure for presentation to the company’s owners:
Before-tax profit ........... $ 100,000
Total assets ............. $2,500,000
Current liabilities .......... $1,200,000
Average interest rate on debt ...... 7%
Average tax rate ........... 28%

Required
Calculate Garringer Glove’s EVA. Is the company creating wealth for its owners?



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  • CreatedMarch 11, 2015
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