Economic value added

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075 Show Attempt History Current Attempt in Progress Paula Boothe president of the Cheyenne Corporation, has mandated a minimum 9% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 11%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 12% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,834,000 in a new line of energy drinks that is expected to generate $314.000 in operating income. Assume that Cheyenne Corporation's actual weighted average cost of capital is 11% and its tax rate is 32%. (a) Your answer is incorrect Calculate the economic value added of the proposed new line of energy drinks. (If the economic value added is negative then enter with a negative sign preceding the number. e.3. -5,125 or parenthesis. e.s. (5,125). Round answer to O decimal places, e.g. 5,125.) Economic value added $ 1 Calculate the economic value added of the proposed new line of energy drinks. (if the economic value added is negative then enter with a negative sign preceding the number, e.g.-5,125 or parenthesis, e.g. (5,125). Round answer to decimal places, e.g. 5,125.) Economic value added $ eTextbook and Media Save for Later Attempts: 1 of 3 used Submit Answer (b) If Martin Koch is evaluated based on economic value added, will he choose to invest in the new line of energy drinks? e Textbook and Media Attempts: 0 of 3 used Submit Answer Save for Later