Irene Corp, whose tax rate is 40%, has two sources of funds: long term debt with a market value of $8,000,000 with an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Irene has 2 operating divisions, the blue division and the gold division, with the following financial measures for the current year:

	Total Assets	Current Liabilities	Operating Income
Blue Division	9,500,000	2,800,000	1,055,000
Gold Division	11,000,000	2,200,000	1,200,000

What is the economic value added (EVA) for the Blue division?

A. ($233,400)

B. $21,960

C. $188,600

D. $433,960

Answer rating: 100% (QA)

Cost of Debt capital 8 x 1040 48 Required Return on Deb... View the full answer