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 $ 889.00 Cost of goods sold 749.00 Depreciation 39.00

Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales $ 889.00 Cost of goods sold 749.00 Depreciation 39.00 Earnings before interest and taxes (EBIT) $ 101.00 Interest expense 20.00 Income before tax $ 81.00 Taxes 17.01 Net income $ 63.99 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Current assets $ 377 $ 328 Long-term assets 274 230 Total assets $ 651 $ 558 Liabilities and shareholders equity Current liabilities $ 202 $ 165 Long-term debt 116 129 Shareholders equity 333 264 Total liabilities and shareholders equity $ 651 $ 558 The companys cost of capital is 8.5%. a. Calculate Watervans economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is the companys 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?

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

Step: 3

blur-text-image

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

Write the Lewis structure of CH 2 CCH 2 .

Answered: 1 week ago