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Question 2 Axis company is a very small company in terms of market capitalisation. The information about this company is given below: Total assets =

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Question 2 Axis company is a very small company in terms of market capitalisation. The information about this company is given below: Total assets = $200000 Current assets = $45000 Half of the investment is financed by liability and the rest is financed by equity Cost of equity = 12% Cost of debt = 6% Tax rate = 30% Earning before interest and tax = $250000 a) Calculate the capital charge. b) Calculate the equity charge c) Calculate the economic value added (EVA) d) Compare the EVA with the net income of the company and what does it indicate to a management accountant? [20 marks 1

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