Question
Yu Pty Ltd has two sources of funds: long-term debt with a market and book value of $4,800,000 issued at an interest rate of 10%,
Yu Pty Ltd has two sources of funds: long-term debt with a market and book value of $4,800,000 issued at an interest rate of 10%, and equity capital that has a market value of $3,500,000 (book value of $2,100,000). Yu has profit centres in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 12%, while the tax rate is 35%.
Operating Income Assets Current Liabilities
Alpha $480,000 $2,000,000 $100,000
Beta $600,000 $4,000,000 $300,000
Gamma $1,650,000 $5,500,000 $750,000
The economic value added (EVA) for the Alpha division is __________. (Round the intermediary answer to four decimal places, and the final answer to a whole number.)
| a. | $84,000 | |
| b. | $128,460 | |
| c. | $129,180 | |
| d. | $296,460 | |
| e. | None of the answers. |
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