Callaway Concrete uses Economic Value Added as a financial performance measure. Callaway has $ 240 million in assets, and the firm has financed its assets with 37 percent equity and 63 percent debt with an interest rate of 6 percent. The firm’s opportunity cost on its funds is 12 percent, while the operating return on the firm’s assets is 14 percent.
a. What is the Economic Value Added created or destroyed by Callaway Concrete?
b. What does Economic Value Added measure?