Question
The MistleToe Corporation sells Christmas decorations. They had the following financial information for 2021: 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 2021:
| 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 to Equity Ratio |
| 2 |
| 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 2021 to help calculate bonuses.
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
