Sevilla Chemicals earned $1 billion in after-tax operating income on capital invested of $5 billion last year. The firm’s cost of equity is 12%, its debt-to-capital ratio is 25%, and the after-tax cost of debt is 4.5%.

a. Estimate the economic value added by Sevilla Chemicals last year.

b. Assume now that the entire chemical industry earned $40 billion after taxes on capital invested of $180 billion, and that the cost of capital for the industry is 10%. Estimate the economic value added by the entire industry.

c. Based on economic value added, how did Sevilla do relative to the industry?