EVA) EVA is used by top management at Denver Technologies to measure and evaluate the performance of segment managers. The company’s cost of capital is 13 percent. In 2006, its Schnepel subsidiary generated after-tax in¬ come of $13,260,000, with $8,900,000 fair market value of invested capital.

a. Compute the subsidiary’s EVA.

b. As the controller of Denver Technologies, how would you determine the fair value of capital investment for a particular division?

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