Question
All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt
All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadians $402 million debt is 9 percent, and the companys tax rate is 40 percent. The cost of All-Canadians equity capital is 12 percent. Moreover, the market value of the companys equity is $603 million. (The book value of All-Canadians equity is $432 million, but that amount does not reflect the current value of the companys assets or the value of intangible assets.)
The following data (in millions) pertain to All-Canadians three divisions.
Division | Before-Tax Operating Income | Current Liabilities | Total Assets | |||||||||||||
Pacific | $ | 14 | $ | 7 | $ | 72 | ||||||||||
Plains | 47 | 6 | 280 | |||||||||||||
Atlantic | 50 | 10 | 482 | |||||||||||||
Compute the economic value added (or EVA) for each of the company's three divisions. (Do not round intermediate calculations. Enter your final answers in dollars and not millions.)
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