Question
The MistleToe Corporation sells Christmas decorations. They had the following financial information for 2020: Pre-Tax Operating Profit $1,500,000 Net Operating Assets (Invested Capital) $10,000,000 Capital
The MistleToe Corporation sells Christmas decorations. They had the following financial
information for 2020:
Pre-Tax Operating Profit
$1,500,000
Net Operating Assets (Invested Capital)
$10,000,000
Capital employed but not included in operating assets
$2,000,000
Debt
Equity
8,000,000
4,000,000
Pre-tax cost of debt
12%
Securities premium over risk-free rate
9%
Risk-Free rate
6%
Tax rate
35%
The MistleToe Corporation has decided to implement an EVA bonus plan for its top executives.
Your job is to calculate the Economic Value Added to the corporation in 2020 to help calculate
bonuses.
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
15th Edition
978-0256168723, 77388720, 256168725, 9780077388720, 978-007337960
