The Jeske Company had the following financial results for two recent fiscal years (in millions):

1. Suppose that Jeske’s cost of capital is 11.5%. Compute the company’s EVA for years 1 and 2.

Assume definitions of after-tax operating income and invested capital as reported in Jeske’s annual reports without adjustments advocated by Stern Stewart or others.

2. Discuss the change in EVA between years 1 and 2.

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Revenues Operating expenses Cash income taxes Average invested capital (total assets less current liabilities) Year 2 $4,463 3,569 292 $2,854 Year 1 S4,510 3,615 255 $2,689