General Motors Balance Sheet: Year 2016 2017 2018 2019 2020 2021 2022 Total Assets 221,690 212,482 227,339 228,037 235,194 244,718 264,037 Operating Liabilities 49,226 44,412 46,437 44,271 39,865 38,227 52,396 Net Operating Assets $ 172,464 $ 168,070 $ 180,902 $ 183,766 $ 195,329 $ 206,491 $ 211,641 Total Debt 75,123 94,219 104,951 103,324 109,894 109,379 108,916 Total Equity and Claims $ 97,341 $ 73,851 $ 75,951 $ 80,442 $ 85,435 $ 97,112 $ 102,725 Total Debt, Equity and Claims $ 172,464 $ 168,070 $ 180,902 $ 183,766 $ 195,329 $ 206,491 $ 211,641 General Motors Income Statement: Year 2016 2017 2018 2019 2020 2021 2022 Total Revenue 149,184 145,588 147,049 137,237 122,485 127,004 156,735 Cost of Revenue, Total 130,153 127,357 132,954 123,265 107,313 105,726 135,754 Selling, General and Other expense 10,345 9,570 9,650 8,491 8,538 11,954 10,667 Operating Income 8,686 8,661 4,445 5,481 6,634 9,324 10,314 Given information for General Motors: Cost of debt General Motors (from the footnotes to the financial statements) 2.80% Beta for General Motors (from Yahoo or other financial sources) 1.39 Normalized risk free rate of return in the market (observing the 10 rate on government issued securities) 3.00% Equity risk premium (from historical studies of the market) 5.00% Market value of debt (use book or amount disclosed in the footnotes if different) $ 109,379 Number of common shares outstanding 1,460 Market price of the common stock (on July 13, 2021) $ 31.81 Market value of equity (number of shares times the stock price) Calculate the required return (weighted average cost of capital) Market Weights Component Weighted Values Cost Cost Debt Equity Required return (weighted average cost of capital)...................................... Calculate the Economic Profit (Economic Value Added) Year 2016 2017 2018 2019 2020 2021 2022 Net Operating Assets $ 172,464 $ 168,070 $ 180,902 $ 183,766 $ 195,329 $ 206,491 $ 211,641 times the required return Required income in dollars Year 2016 2017 2018 2019 2020 2021 2022 Operating Income earned $ 8,686 $ 8,661 $ 4,445 $ 5,481 $ 6,634 $ 9,324 $ 10,314 Less required income Economic profit or (loss) Another way to look at this: Return on invested capital 5.04% 5.15% 2.46% 2.98% 3.40% 4.52% 4.87% Weighted average cost of capital Spread