Compute the operating income

Assignment Help Finance Basics

Reference no: EM13267003

Backhaus Beer Brewers (BBB) just announced that the current fiscal year's income statement reports its net income to be $1.2 million. BBB's marginal tax rate is 40 percent, and its interest expense for the year was $1.5 million. The company has $8.0 million of invested capital, of which 60 percent is debt. In addition, BBB tries to maintain a weighted average cost of capital (WACC) near 12 percent.

a. Compute the operating income (EBIT) that BBB earned in the current year
b. What is BBB's economic value added (EVA) for the current year?
c. BBB has 500,000 shares of common stock outstanding. According to the EVA value you computed in question B, how much can BBB pay in dividends per share before the value of the firm would start to decrease? If BBB doesn't pay any dividends, what would you expect to happen to the value of the firm?

Reference no: EM13267003

Questions Cloud

Determine efficience and praice variances : quantity variable, quanitity fixes, unit cost, variable cost, averge fixed cost, average total cost in addition to patient days and expected days. I have another table with actual quanity used, unit cost, total cost, and patient days.

How do you feel about the issue of globalization : How do you feel about the issue of globalization and do you think it is more positive or negative? Why?

Use the capm to determine the appropriate discount rate : Allied products uses the MACRS depreciation schedule (seven-year property class). The immediate initial working capital requirement is $2 million thereafter the net working capital requirement would be 5% of sales.

Define what is the molarity of the solution : A solution 14.3 % (by mass) HCl. The density of the solution is 1.08 g/mL. What is the molarity of the solution

Compute the operating income : What is BBB's economic value added (EVA) for the current year?

What interest rate compounded annually : What interest rate, compounded annually, does this represent?

Strategic management in emerging : Strategic Management in Emerging/Developing Countries: Effects of Demographic Divide and Hyper Urbanization on Business Strategy.

Explain need numeric result and absolute error : Find the absolute and percent relative uncertainty and express each answer with a reasonable amount of significant figures. 5.1(+-0.3) - 3.7(+-0.2) Need Numeric Result, Absolute Error, and Relative Error

Explain natrually from degradation of organic matter : It is produced natrually from degradation of organic matter, and also anthropogenically from fuel combustion.) The acid dissociation constant, Ka for formic acid is 10-3.7. Assume T=4*C and I=0.

User Account

All Pages