Question: Briggs & Stratton Corporation is the worlds largest maker of air-cooled gasoline engines for outdoor power equipment. The companys engines are used by the lawn

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, €œManagement 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.

2011 2010 Net Income Shareholder's investment 24,355 36,615 737,943 650,577

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