Consider the information given below.

Equity = 600 rS = 16%

Debt = 400 rD = 6%

Tax rate = 40% ROIC = 22%.

(a) Calculate the economic value added one year from today.

(b) Assume that after year one the economic value added is a perpetuity. Calculate

the value of the firm and the market value added.

(c) Instead of the models in (a) and (b), suppose that beginning today the firm will

grow by 6% forever (to infinity). Calculate the value of the firm and the market

value added.