Question: Stonex 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

Stonex 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 9%, and equity capital with a market value of $18,000,000 and a cost of equity of 13%. Stonex has two operating divisions, the Blue division and the Gold 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. $11,000,000 $2,900,000 1,500,000

Calculate EVA for the Gold Division. (Round intermediary calculations to four decimal places.)

a. $930,000

b. ($36,570)

c. $893,430

d, $36,570

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