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Golden Gate Construction Assoclates, a real estate developer and bullding contractor In San Francisco, has two sources of long-term capital: debt and equity. The cost
Golden Gate Construction Assoclates, a real estate developer and bullding contractor In San Francisco, has two sources of long-term capital: debt and equity. The cost to Golden Gate of Issulng debt is the after-tax cost of the Interest payments on the debt, taking Into account the fact that the Interest payments are tax deductible. The cost of Golden Gate's equity capltal Is the Investment opportunity rate of Golden Gate's Investors, that Is, the rate they could earn on Investments of similar risk to that of Investing in Golden Gate Construction Assoclates. The Interest rate on Golden Gate's $67 million of long-term debt is 8 percent, and the company's tax rate is 40 percent. The cost of Golden Gate's equlty capital is 15 percent. Moreover, the market value (and book value) of Golden Gate's equity is $89 million. The company has two divisions: the real estate division and the construction division. The divisions' total assets, current llabilitles, and before-tax operating income for the most recent year are as follows: Requlred: Calculate the economic value added (EVA) for each of Golden Gate Construction Assoclates' divisions. Note: Round your weighted-average cost of capltal to 3 decimal places (I.e. .123). Enter your answers in millions rounded to 3 decimal places (I.e. $1,234,000 should be entered as $1.234 ). Answer is complete but not entirely correct
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