Question: Springfield Corporation, whose tax rate is 30%, has two sources of funds: long-term debt with a market value of $8,400,000 and an interest rate of

Springfield Corporation, whose tax rate is 30%, has two sources of funds: long-term debt with a market
value of $8,400,000 and an interest rate of 8%, and equity capital with a market value of $14,000,000 that
commands a 7-point premium. Springfield has two operating divisions, the Blue division and the Gold
division, with the following financial measures for the current year:
Total Assets
Operating Income
Blue Division $9,500,000
$1,059,000
Gold Division $12,900,000
$1,200.000
What is Economic Value Added (EVA) for the Blue Division?

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