Given information for Volkswagen: Cost of debt Volkswagen (from the footnotes to the financial statements) 1.83% Beta for Volkswagen Motors (from Yahoo or other financial sources) 1.27 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) $ 248,878 Number of common shares outstanding 5,744 Market price of the common stock $ 13.49 Market value of equity (number of shares times the stock price on balance sheet date) Calculate the required return (weighted average cost of capital) Market WeightsComponent Weighted Values CostCost Debt Equity Required return (weighted average cost of capital)................................... Calculate the Economic Profit (Economic Value Added) Year2016201720182019202020212022 Net Operating Assets$ 458,040 $ 472,528 $ 514,390 $ 550,842 $ 562,347 $ 598,987 $ 641,771 times the required return Required income in dollars Year2016201720182019202020212022 Operating Income earned$ 8,421 $ 16,382 $ 16,501 $ 20,107 $ 11,470 $ 23,058 $ 36,727 Less required income Economic profit or (loss) Another way to look at this: Return on invested capital 1.84%3.47%3.21%3.65%2.04%3.85%5.72% Weighted average cost of capital Spread