Reference no: EM132527545
Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT(Figures in $ millions)Net sales$894.00
Cost of goods sold 754.00
Depreciation 44.00
Earnings before interest and taxes (EBIT)$96.00
Interest expense 25.00
Income before tax$71.00
Taxes 14.91
Net income$56.09
BALANCE SHEET(Figures in $ millions) End of Year Start of YearAssets Current assets$382
$338
Long-term assets 284
235
Total assets$666
$573
Liabilities and shareholders' equity Current liabilities$207
$170
Long-term debt 121
134
Shareholders' equity 338
269
Total liabilities and shareholders' equity$666
$573
The company's cost of capital is 8.5%.
a. Calculate Watervan's economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
b. What is the company's return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)
d. Is the company creating value for its shareholders?
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Calculate watervan economic value added
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