13-3B. (Calculating economic value added) The management of the Hackberg Corporation (from problem 13-2B) wishes to estimate EVA for each of the next four years of the firm's operations. An evaluation of the firm's invested capital reveals the following values beginning with the cur- rent period (year 0):

a. Calculate Hackberg's EVAS for years 1 through 4. What do these values tell you about the valne being created by Hackberg?

b. What is Hackberg's return on invested capital (ROIC) for each of the years 1 through 4? Relate the firm's ROIC to your EVA estimates.

c. Hackberg's EVAs for years 4 and beyond formi a level perpetuity equal to the EVA for year 3. Calculate the present value of the firm's EVAs for years 1 through infinity. How does this present value compare to the market value added for the firm (see part b of problem 13-2B)? You can assume that the free cash-flow value of Hackberg from prob- lem 13-2B is $30,513.88.

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$ 6,995.03 YEARS Current assets Property, plant, 0 $ 5,645.45 1 2 3 4 $ 6,053.18 $ 6,501.68 $ 6,995.03 and equipment Invested capital 5,645.45 $11,290.90 6,210.00 $12,263.18 $ 6,831.00 $13,332.68 7,514.10 $14,509.13 7,514.10 $14,509.13