Lotus LTD is a company that manufactures shoes. It has to decide if the project it is about to embark on will add economic value to the company. The management decides to use EVA to determine it. So it is trying to look at different components that are distributing to its success. The following information used is on the table below:

Current liabilities [non- interest bearing]

$ 18,500

Current Assets

$ 45,600

Long term liabilities

$ 82,500

Equity

$ 110,700

Accumulated Depreciation

$ 14,000

Operating Expenses

$ 32,600

Tax rate

19%

Gross profit

$63,000

Depreciation Expense

$3,500

Interest on debt

$ 5,000

Research & Development

$ 9,100

Training cost of employees

$ 11,500

Government Bond Rate

4.2%

Market Risk

1.3

Market index at start

24600

Market index at the end

27100

Hint : Be careful when using the depreciation provided.

Note: Research & Development expenses and training expenses are already included in operating expenses

REQUIRED

1. Calculate EBIT (operating income) and tax expenses

2. Calculate net Plant, Property and Equipment [PPE]

3. Calculate WACC( weighted average cost of capital)

4. Calculate the Total Capital employed [TCE].

5. Calculate EVA [Economic Value Added]

6. Why is the WACC of a company using debt less than the cost of

equity