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Calculate economic value added

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Reference no: EM132758820

Herbal World is a small, but profitable producer of beauty cosmetics using the plant Aloe Vera. Though it is not a high-tech business, yet Herbal's earnings have averaged around 18.5 lakh after tax, mainly on the strength of its patented beauty cream to remove the pimples.

The patent has nine years to run, and Herbal has been 50 lakhs for the patent rights. Herbal's assets include 50 lakhs of property, plant and equipment and 25 lakhs of working capital. However, the patent is not shown in the books of Herbal World. Assuming Herbal's cost of capital being 14 percent, calculate its Economic Value Added (EVA).

Reference no: EM132758820

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