AT&T, Inc. (T) 8-2. Economic value added The business need to make higher return than the WACC to be profitable. The WACC is the opportunity cost of the capital from the capital providers. The dollar amount business can achieve beyond the opportunity cost of capital is called economic value added. EBIT = ?? Assume T = Tax rate = 35% Total capital from financing = (Debt + Preferred + Equity) Economic value added = EBIT * (1-T) - (Total capital) * WACC. * Tax rate EBIT EBIT (1-T) WACC Investor supplied capital Economic value added ?? ?? ?? ?? ?? ?? AT&T, Inc. (T) 8-2. Economic value added The business need to make higher return than the WACC to be profitable. The WACC is the opportunity cost of the capital from the capital providers. The dollar amount business can achieve beyond the opportunity cost of capital is called economic value added. EBIT = ?? Assume T = Tax rate = 35% Total capital from financing =(Debt + Preferred + Equity) Economic value added = EBIT * (1-T)-(Total capital) * WACC. Economic value added tax rate EBIT EBIT (1-T) WACC Investor supplied capital Economic value added 9% 3,714.00 3,366.37 4.02% 239,584.26 -6,260.24 * Economic value added - EBIT * (1-T)-(Total capital) * WACC. Economic value added tax rate EBIT EBIT*(1-T) WACC Investor supplied capital Economic value added 9% 3,714.00 3,366.37 4.02% 239,584.26 -6,260.24 Question: . Is the economic value added positive or negative? What is the implication from the result