Refer to Problem 19-44 for reported financial statement data for Nimrod Inc.

Statement of Income
Most Recent Year (000s)
Net sales....................................................$2,000
Cost of goods sold (CGS)............................1,670
Gross margin..................................................330
Less: SG&A costs............................................185
Depreciation.....................................................35
Other operating expenses..............................50
Total expenses...............................................270
Net operating profit........................................60
Less: Interest expense....................................22
Plus: Other income.........................................12
Income before tax...........................................50
Less: Income tax (@ 40%)...............................20
Net profit after tax.......................................$ 30

Required

1. Using the financing approach, prepare an estimate of EVA® NOPAT. In addition to the preceding data, you discover the following: increase during the year of the LIFO reserve, $2; imputed interest expense on non-capitalized leases, $4; and increase in deferred tax liability during the year, $5.

2. What is the rationale for the various adjustments you made to the company’s reported income statement?

3. Using the financing approach, prepare an estimate of EVA® capital. In addition to the preceding information, you note the following: end-of-year value of the LIFO reserve, $10; and present value of noncapitalized leases, $50.

4. What is the rationale for the adjustments you made to reported balance sheet amounts in order to estimate EVA® capital?

5. Given the company’s WACC, what is the estimated EVA® for the year?

6. How do you interpret the company’s EVA® for the year?