Question
Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales $ 900.00 Cost of goods sold 760.00 Depreciation 50.00
Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT | ||
(Figures in $ millions) | ||
Net sales | $ | 900.00 |
Cost of goods sold | 760.00 | |
Depreciation | 50.00 | |
Earnings before interest and taxes (EBIT) | $ | 90.00 |
Interest expense | 31.00 | |
Income before tax | $ | 59.00 |
Taxes | 12.39 | |
Net income | $ | 46.61 |
BALANCE SHEET | |||||||
(Figures in $ millions) | |||||||
End of Year | Start of Year | ||||||
Assets | |||||||
Current assets | $ | 388 | $ | 350 | |||
Long-term assets | 296 | 241 | |||||
Total assets | $ | 684 | $ | 591 | |||
Liabilities and shareholders equity | |||||||
Current liabilities | $ | 213 | $ | 176 | |||
Long-term debt | 127 | 140 | |||||
Shareholders equity | 344 | 256 | |||||
Total liabilities and shareholders equity | $ | 684 | $ | 572 | |||
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?
Please show how you got your totals... I specially don't understand how to calculate the EVA! Thanks so much!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started