Using the financial data in Exhibit 5, and elsewhere, and assuming 10% as the WACC and 35% as the tax rate, compute EVA for Valmont's business segments for the years 1990-1993. Compute for Irrigation and for the Industrial Construction and Valmont Electric units of the Industrial Products segment. You should also consider the EVA of segment competitors to get a sense of industry conditions for those segments. What conclusions can you draw? For example, should Valmont expand or contract Irrigation? Can you use EVA to help formulate the strategic direction of Valmont? Compute invested capital for a year as Beginning-of-Year Assets minus Accounts Payable minus Other Accrued Liabilities.

The calculations are completed. Please comment on these questions:

What conclusions can you draw?

Should Valmont expand or contract Irrigation? 

Can you use EVA to help formulate the strategic direction of Valmont?

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1234567 Valmont's EVA See Exhibits 2 and 3 for data. 1 Valmont Industry EVA Calculations 2 Using beginning of year invested capital, 35% tax rate, 10% WACC 7 Total assets 8 Accounts payable 9 Accurals 10 Invested capital 11 12 Operating profit 13 Taxes 14 NOPAT B 15 16 NOPAT 17 Capital charge 18 EVA 19 20 C D E 1991 1992 1993 1990 $261,590 $283,233 $280,859 $273,218 $50,436 $29,615 $34,086 $32,326 $34,130 $41,482 $45,360 $41,989 $177,024 $212,136 $201,413 $198,903 $25,381 ($6,025) $20,990 $25,918 $8,883 ($2,109) $7,347 $9,071 $16,498 ($3,916) $13,644 $16,847 $16,498 ($3,916) $13,644 $16,847 $17,702 $21,214 $20,141 $19,890 ($1,205) ($25,130) ($6,498) ($3,044) LL F G H 1234567 Valmont's EVA See Exhibits 2 and 3 for data. 1 Valmont Industry EVA Calculations 2 Using beginning of year invested capital, 35% tax rate, 10% WACC 7 Total assets 8 Accounts payable 9 Accurals 10 Invested capital 11 12 Operating profit 13 Taxes 14 NOPAT B 15 16 NOPAT 17 Capital charge 18 EVA 19 20 C D E 1991 1992 1993 1990 $261,590 $283,233 $280,859 $273,218 $50,436 $29,615 $34,086 $32,326 $34,130 $41,482 $45,360 $41,989 $177,024 $212,136 $201,413 $198,903 $25,381 ($6,025) $20,990 $25,918 $8,883 ($2,109) $7,347 $9,071 $16,498 ($3,916) $13,644 $16,847 $16,498 ($3,916) $13,644 $16,847 $17,702 $21,214 $20,141 $19,890 ($1,205) ($25,130) ($6,498) ($3,044) LL F G H