Problem 13-45 Weighted-Average Cost of Capital; Economic Value Added (EVA) (LO 13-2)

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[The following information applies to the questions displayed below.] All-Canadian, Ltd., is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadians $416 million debt is 9 percent, and the companys combined federal and state income tax rates amount to 30 percent. The cost of All-Canadians equity capital is 12 percent. Moreover, the market value of the companys equity is $544 million. (The book value of All-Canadians equity is $440 million, but that amount does not reflect the current value of the companys assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadians three divisions.

Division	Before-Tax Operating Income					Current Liabilities					Total Assets
Pacific		$	12				$	9				$	66
Plains			40					8					316
Atlantic			43					12					496

Problem 13-45 Part 1

Required: 1. Compute All-Canadians weighted-average cost of capital (WACC). (Do not round intermediate calculations. Round your final answer to 2 decimal places (i.e., .1234 should be entered as 12.34).)

8. Problem 13-45 Weighted-Average Cost of Capital; Economic Value Added (EVA) (LO 13-2)

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[The following information applies to the questions displayed below.] All-Canadian, Ltd., is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadians $416 million debt is 9 percent, and the companys combined federal and state income tax rates amount to 30 percent. The cost of All-Canadians equity capital is 12 percent. Moreover, the market value of the companys equity is $544 million. (The book value of All-Canadians equity is $440 million, but that amount does not reflect the current value of the companys assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadians three divisions.

Division	Before-Tax Operating Income					Current Liabilities					Total Assets
Pacific		$	12				$	9				$	66
Plains			40					8					316
Atlantic			43					12					496

Problem 13-45 Part 2

2. Compute the economic value added (or EVA) for each of the company's three divisions. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your final answers in dollars and not millions.)

Weighted average cost of capital %