Question
Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT(Figures in $ millions)Net sales$ 881Cost of goods sold741Depreciation31Earnings before interest and taxes (EBIT)$ 109Interest expense12Income
Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT(Figures in $ millions)Net sales$ 881Cost of goods sold741Depreciation31Earnings before interest and taxes (EBIT)$ 109Interest expense12Income before tax$ 97Taxes20Net income$ 77BALANCE SHEET(Figures in $ millions)End of YearStart of YearAssetsCurrent assets$ 369$ 312Long-term assets258222Total assets$ 627$ 534Liabilities and shareholders equityCurrent liabilities$ 194$ 157Long-term debt108121Shareholders equity325256Total liabilities and shareholders equity$ 627$ 534The companys cost of capital is 8.5%.
Required:
Calculate Watervans economic value added (EVA).
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
What is the companys return on capital? (Use start-of-year rather than average capital.)
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
What is its return on equity? (Use start-of-year rather than average equity.)
Note: Enter your answer as a percent rounded to 2 decimal places.
Is the company creating value for its shareholders?
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