Review Volkswagens economic profit trend for the five years. Is this trending in the right direction, too high, too low, misrepresented because of some factor? How or why?

2019 Volkswagen's Balance Sheet: Year Total Assets Operating Liabilities Net Operating Assets $ $ $ 2016 2017 485,752 $ 500,525 $ 27,712 $ 27,998 $ 458,040 $ 472,528 $ 2018 543,161 $ 28,771 $ 514,390 $ 578,626 $ 27,784 $ 550,842 $ 2020 589,347 26,999 562,347 Total Debt Total Equity and Claims Total Debt, Equity and Claims $ $ $ 183,544 $ 274,497 $ 458,040 $ 193,802 $ 278,726 $ 472,528 $ 226,299 $ 235,222 $ 288,091 $ 315,619 $ 514,390 $ 550,842 $ 238,001 324,346 562,347 2019 Volkswagen's Income Statement: Year Total Revenue $ Cost of Revenue, Total $ Selling, General and Other expense $ Operating Income $ 2016 257,578 $ 207,352 $ 41,806 $ 8,421 $ 2017 272,140 $ 219,106 $ 36,652 $ 16,382 $ 2018 279,608 $ 223,278 $ 39,828 $ 16,501 $ 299,504 $ 240,261 $ 39,137 $ 20,107 $ 2020 264,237 216,665 36,102 11,470 1.42% 1.48 2.50% Given information for Volkswagen: Cost of debt Volkswagen (from the footnotes to the financial statements) Beta for Volkswagen Motors (from Yahoo or other financial sources) Normalized risk free rate of return in the market (observing the 10 rate on government issued securities) Equity risk premium (from historical studies of the market) Market value of debt (use book or amount disclosed in the footnotes if different) Number of common shares outstanding Market price of the common stock Market value of equity (number of shares times the stock price) $ 5.00% 238,001 5,010 34.35 172,094 $ $ Calculate the required return (weighted average cost of capital) Market Weights Values Debt $ 238,001 58% Equity $ 172,094 42% $ 410,095 Required return (weighted average cost of capital). Component Cost 1.42% 9.90% Weighted Cost 0.82% 4.15% 4.98% Calculate the Economic Profit (Economic Value Added) Net Operating Assets $ 458,040 $ times the required return 4.98% Required income in dollars $ 22,793 $ 472,528 $ 4.98% 23,514 $ 514,390 $ 4.98% 25,597 $ 550,842 $ 4.98% 27,411 $ 562,347 4.98% 27,984 2016 2019 2020 Year Operating Income earned Less required income Economic profit or loss) $ $ $ 8,421 $ 22,793 $ (14,372) $ 2017 16,382 $ 23,514 $ (7,132) $ 2018 16,501 $ 25,597 $ (9,096) $ 20,107 $ 27,411 $ (7,305) $ 11,470 27,984 (16,514) Another way to look at this: Return on invested capital Weighted average cost of capital Spread 1.84% 4.98% -3.14% 3.47% 4.98% -1.51% 3.21% 4.98% 3.65% 4.98% -1.33% 2.04% 4.98% -1.77% -2.94% 2019 Volkswagen's Balance Sheet: Year Total Assets Operating Liabilities Net Operating Assets $ $ $ 2016 2017 485,752 $ 500,525 $ 27,712 $ 27,998 $ 458,040 $ 472,528 $ 2018 543,161 $ 28,771 $ 514,390 $ 578,626 $ 27,784 $ 550,842 $ 2020 589,347 26,999 562,347 Total Debt Total Equity and Claims Total Debt, Equity and Claims $ $ $ 183,544 $ 274,497 $ 458,040 $ 193,802 $ 278,726 $ 472,528 $ 226,299 $ 235,222 $ 288,091 $ 315,619 $ 514,390 $ 550,842 $ 238,001 324,346 562,347 2019 Volkswagen's Income Statement: Year Total Revenue $ Cost of Revenue, Total $ Selling, General and Other expense $ Operating Income $ 2016 257,578 $ 207,352 $ 41,806 $ 8,421 $ 2017 272,140 $ 219,106 $ 36,652 $ 16,382 $ 2018 279,608 $ 223,278 $ 39,828 $ 16,501 $ 299,504 $ 240,261 $ 39,137 $ 20,107 $ 2020 264,237 216,665 36,102 11,470 1.42% 1.48 2.50% Given information for Volkswagen: Cost of debt Volkswagen (from the footnotes to the financial statements) Beta for Volkswagen Motors (from Yahoo or other financial sources) Normalized risk free rate of return in the market (observing the 10 rate on government issued securities) Equity risk premium (from historical studies of the market) Market value of debt (use book or amount disclosed in the footnotes if different) Number of common shares outstanding Market price of the common stock Market value of equity (number of shares times the stock price) $ 5.00% 238,001 5,010 34.35 172,094 $ $ Calculate the required return (weighted average cost of capital) Market Weights Values Debt $ 238,001 58% Equity $ 172,094 42% $ 410,095 Required return (weighted average cost of capital). Component Cost 1.42% 9.90% Weighted Cost 0.82% 4.15% 4.98% Calculate the Economic Profit (Economic Value Added) Net Operating Assets $ 458,040 $ times the required return 4.98% Required income in dollars $ 22,793 $ 472,528 $ 4.98% 23,514 $ 514,390 $ 4.98% 25,597 $ 550,842 $ 4.98% 27,411 $ 562,347 4.98% 27,984 2016 2019 2020 Year Operating Income earned Less required income Economic profit or loss) $ $ $ 8,421 $ 22,793 $ (14,372) $ 2017 16,382 $ 23,514 $ (7,132) $ 2018 16,501 $ 25,597 $ (9,096) $ 20,107 $ 27,411 $ (7,305) $ 11,470 27,984 (16,514) Another way to look at this: Return on invested capital Weighted average cost of capital Spread 1.84% 4.98% -3.14% 3.47% 4.98% -1.51% 3.21% 4.98% 3.65% 4.98% -1.33% 2.04% 4.98% -1.77% -2.94%