Question: ABC Corp, whose tax rate is 38%, has two sources of funds: long-term debt with a market value of $6,500,000 and an interest rate of

ABC Corp, whose tax rate is 38%, has two sources of funds: long-term debt with a market value of $6,500,000 and an interest rate of 8%, and equity capital with a market value of $14,000,000 and a cost of equity of 12%. ABC has two operating divisions, the B division and the G division, with the following financial measures for the current year:

Total Assets Current Liabilities Operating Income

Blue Div. $9,500,000 $2,500,000 $1,155,000

Gold Div. $10,000,000 $2,800,000 $1,400,000

Calculate EVA for the G Division. (Round intermediary calculations to four decimal places.) Show your work to receive partial credit.

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