Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in 5 millions) Coat of...
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Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in 5 millions) Coat of goods sold Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes Net income ASANTE Current assets Long-term assets BALANCE SHEET (Figures in 5 millions) Total assets Liabilities and shareholders equity Current liabilition Long-term debt Shareholders' equity Total liabilities and shareholders equity $ 900.00 760.00 50.00 $ 90,00 31.00 $59.00 12. 39 $ 46.61 End of Year $ 388 296 $ 654 $ 213 127 344 $ 634 Start of Year $ 350 241 $ 176 140 256 $ 572 The company's cost of capital is 8.5% Required: a. Calculate Watervan's economic value added (EVA) Note: Do not round Intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What is the company's return on capital? (Use start-of-year rather than average capital) Note: Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is its return on equity? (Use start-of-year rather than average equity.) Note: Enter your answer as a percent rounded to 2 decimal places. d. Is the company creating value for its shareholders? Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in 5 millions) Coat of goods sold Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes Net income ASANTE Current assets Long-term assets BALANCE SHEET (Figures in 5 millions) Total assets Liabilities and shareholders equity Current liabilition Long-term debt Shareholders' equity Total liabilities and shareholders equity $ 900.00 760.00 50.00 $ 90,00 31.00 $59.00 12. 39 $ 46.61 End of Year $ 388 296 $ 654 $ 213 127 344 $ 634 Start of Year $ 350 241 $ 176 140 256 $ 572 The company's cost of capital is 8.5% Required: a. Calculate Watervan's economic value added (EVA) Note: Do not round Intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What is the company's return on capital? (Use start-of-year rather than average capital) Note: Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is its return on equity? (Use start-of-year rather than average equity.) Note: Enter your answer as a percent rounded to 2 decimal places. d. Is the company creating value for its shareholders?
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a Economic Value Added NOPAT Cost of Capital Employed EBIT 1 Tax Rate Cost of Capital Capita... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
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