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Baba Nyonya is a multinational company with three divisions: Barat, Timur and Utara. The company has two sources of long-term capital: debt and equity. The
Baba Nyonya is a multinational company with three divisions: Barat, Timur and Utara. The company has two sources of long-term capital: debt and equity. The interest rate on Baba Nyonya's RM400 million debt is 9 percent, and the company's tax rate is 30 percent. The cost of Baba Nyonya's equity capital is 12 percent. Moreover, the market value of the company's equity is RM600 million. (The book value of Baba Nyonya's equity is RM430 million, but that amount does not reflect the current value of the company's assets or value of intangible assets). The following data (in millions) pertain to Baba Nynya's 3 divisions. a. Compute Baba Nyonya's weighted-average cost of capital (WACC). 3m b. Compute the economic value added (or EVA) for each of the company;s three divisions. 6m c. Based on the EVA analysis, give your conclusions. 2m
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