Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Depreciation Earnings before interest and

image text in transcribedimage text in transcribed

Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales Cost of goods sold Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes Net income $892.00 752.00 42.00 $ 98.00 23.00 $ 75.00 15.75 $ 59.25 BALANCE SHEET (Figures in $ millions) End of Year Start of Year $ 380 280 $ 334 233 $ 567 $ 660 Assets Current assets Long-term assets Total assets Liabilities and shareholders' equity Current liabilities Long-term debt Shareholders' equity Total liabilities and shareholders' equity $ 205 119 336 $ 168 132 267 $ 660 $ 567 The company's cost of capital is 8.5%. a. Calculate Watervan's economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is the company's return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.) d. Is the company creating value for its shareholders? Answer is complete but not entirely correct. a. $ b. Economic value added Return on capital Return on equity Is the company creating value for its shareholders? 38.68 million 10.44 % 22.19% c. d. Yes

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Core Concepts

Authors: Raymond Brooks

3rd Edition

0133866742, 9780133866742

More Books

Students also viewed these Finance questions

Question

How does nonverbal communication express cultural values?

Answered: 1 week ago