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Compute the EVA for B Division for the year ended June

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Reference no: EM133123570

Question - B Division of Z Ltd has operating profits and assets for the year ended 30 June 2021 as below:

Operating profit $170,000

Less: Non-cash expenses $6,000

Less: Amortisation of goodwill $4,000

Less: Interest @ 10% $15,000

Profit before tax $145,000

Tax @ 30% $43500

Profits after tax $101500

Total equity $346,000

Long-term debt $150,000

$496,000

Z Ltd has a target capital structure of 25% debt/75% equity. The cost of equity is estimated at 14%. The capital employed at the start of the year amounted to $485,000. Goodwill previously written off against reserves on acquisitions in previous years amounted to $40,000.

Compute the EVA for B Division for the year ended 30 June 2021?

Reference no: EM133123570

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