Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions)
Net sales	881
Cost of goods sold	741
Depreciation	31
Earnings before interest and taxes (EBIT)	109
Interest expense	12
Income before tax	97
Taxes	34
Net income	63

BALANCE SHEET (Figures in $ millions)
End of Year	Start of Year
Assets
Current assets	369	312
Long-term assets	258	222
Total assets	627	534
Liabilities and shareholders' equity
Current liabilities	194	157
Long-term debt	108	121
Shareholders' equity	325	256
Total liabilities and shareholders' equity	627	534

The company's cost of capital is 8.5%.

a. Calculate Watervan's economic value added (EVA).

Answer for a. EVA = after-tax interest + net income - (cost of capital total capitalization)

EVA = (1 .35) 12 + 63 .085 [256 + 121] = 38.76

Question: How do you get the .35 to answer EVA?