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Delta Ltd. two sources of funds: long term debt with a market and book value of $13,500,000 issued at an interest rate of 12 percent
Delta Ltd. two sources of funds: long term debt with a market and book value of $13,500,000 issued at an interest rate of 12 percent and equity capital that has a market and book value of $9,000,000. The cost of equity capital is 5 percent, while the tax rate is 25 percent. Delta Ltd. operates three profit centres. Data for the past year are as follows: Required: (A) What is the company's weighted-average cost of capital? (B) What is the EVA for each profit centre? (C) One criticism of the EVA method is that it is subject to manipulation (see page 905 of Datar et al. (2019)). Why would managers be interested in manipulating the EVA and how could they do it
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