Compute the New York division Economic Value Added

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Question - Roterblade Company supplies helicopters to corporate clients. Roterblade has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million (book value of $8 million). The cost of equity capital for Roterblade is 15%, and its tax rate is 30%. Roterblade has profit centers in four divisions that operate autonomously. The company's results for 2020 are as follows:

 

Operating income

Assets

Current liabilities

New York

$1,750,000

$11,500,000

$2,500,000

Chicago

2,400,000

9,000,000

3,500,000

Dallas

4,675,000

27,500,000

9,500,000

Los Angeles

4,200,000

25,000,000

8,000,000

Required - Compute the New York division's Economic Value Added

A. $1,494,100

B. $335,800

C. $1,136,600

D. $1,260,400

Reference no: EM132780862

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