Question
Spectrum Book Company has two divisions: The Brick and Mortar division sells books through more than 100 bookstores throughout the United States; the Internet division
Spectrum Book Company has two divisions: The Brick and Mortar division sells books through more than 100 bookstores throughout the United States; the Internet division was formed 18 months ago and sells books via the Internet. Data for the past year are:
Brick and Mortar Division | Internet Division | |
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Total assets | $162,000,000 | $15,480,000 |
Noninterest-bearing current liabilities | 7,020,000 | 2,520,000 |
Interest expense | 1,260,000 | 418,500 |
Net income (loss) | 27,810,000 | (1,125,000) |
Tax rate | 40% | 0 |
Cost of capital 10% 12% Required a. Evaluate the two divisions in terms of economic value added (EVA).
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Cost of Capital 10% for brick and mortar and 12% for internet division |
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