On the basis of the following information and assumption, determine which of the two companies have a
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On the basis of the following information and assumption, determine which of the two companies have a higher economic value added:
The applicable tax rate is 30%.
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Particulars Earnings before interest and tax (EBIT) Interest expenses Profit before tax (PBT) Tax Profit after tax (PAT) Capital Employed Shareholders' funds Borrowed funds Cost of capital Borrowed funds Shareholders' funds 2016-17 ( in Crore) SM Limited MS Limited 673.58 875.49 88.86 172.56 584.72 702.93 175.42 210.89 409.30 492.04 2016-17 2015-16 SM Limited MS Limited SM Limited MS Limited 1,952.11 2,706.44 1,700.45 2,300.80 956.43 2,645.43 900.88 2,800.79 2,908.54 5,351.87 2,601.33 5,101.59 12% 15% 14% 16%
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