Question 3 Lumber corporation is a private company and the managers want to know how much of economic value has been added during the current year. So they decided to use EVA to measure the financial performance. The company provided the management accountant department with the following financial data found in the table below: $ Current liabilities 65,300 Current Assets 25% Long term liabilities Bond Payable 185,200 Equity 150,000 Research & development 25,000 Training expenses 13,000 Tax rate 25% Net income 45,500 Sales 76,200 Cogs 33,500 Interest paid on debt 17,000 Risk free rate 6% Risk premium 6.5% Assume that current liabilities are not interest bearing obligation Cost of equity is government bond rate + risk premium REQUIRED 1. Calculate tax, interest expense and EBIT (operating income) 2. Calculate the EBIT after tax. 3. Calculate the total assets. 4. Calculate total capital employed {TCE). 5. What is the WACC of the company? 6. Calculate the economic value added [EVA] 7. What will happen to the share if a company has negative EVA for a while? Why? 8. Why do we use WACC instead of cost of equity only [Re]