Compute evelyn company weighted average cost of capital

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Question - Evelyn Company supplies refrigeration equipment to hotels in the Caribbean. Evelyn Company has two sources of funds: long term debt with a market and book value of $64 million issued at an interest rate of 10%, and equity capital that has a market value of $36 million. The cost of equity capital for Evelyn Company is 12%, and its tax rate is 35%. Evelyn Company has profit centers in four divisions that operate autonomously. The company's results for 2009 are as follows:

 

Operating Income

Assets

Current Liabilities

St. Lucia

$1,750,000

$11,500,000

$2,500,000

Antigua

2,400,000

9,000,000

3,500,000

Barbados

4,675,000

27,500,000

9,500,000

Required -

i. Compute Evelyn Company weighted average cost of capital.

ii. Compute each division's ROI.

iii. Compute each division's Residual Income.

iv. Compute each division's Economic Value Added (EVA).

Reference no: EM133185562

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