Ocean is a small but profitable shipping company. The company's net operating profit has averaged around...

 

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Ocean is a small but profitable shipping company. The company's net operating profit has averaged around $25 million. Ocean's assets value is close to 120 million. Suppose that the company's cost of capital is 18%. The company is exempted from taxes. a) What is EVA (Economic value added)? b) Interpret the result in a) c) What is the company's return on assets? Assume that the company is in business forever. The cash flows every year are assumed to equal the net operating profit. d) What is the net present value of the company? e) Comment on the results in a), c) and d). Ocean is a small but profitable shipping company. The company's net operating profit has averaged around $25 million. Ocean's assets value is close to 120 million. Suppose that the company's cost of capital is 18%. The company is exempted from taxes. a) What is EVA (Economic value added)? b) Interpret the result in a) c) What is the company's return on assets? Assume that the company is in business forever. The cash flows every year are assumed to equal the net operating profit. d) What is the net present value of the company? e) Comment on the results in a), c) and d).

Answer rating: 100% (QA)

a To calculate Economic Value Added EVA we subtract the companys cost of capital from its net operat... View the full answer