CALCULATING ECONOMIC VALUE ADDED East Mullett Manufacturing earned net income last year as shown in the following income statement:

Sales $531,250 Cost of goods sold 280,000 Gross margin $251,250 Selling and administrative expense 187,500 Operating income $ 63,750 Less: Income taxes (@ 40%) 25,500 Net income $ 38,250 Total capital employed equaled $400,000. East Mullett’s actual cost of capital is 8 percent.

Required:

Calculate the EVA for East Mullett.

Exercises Exercise