Solution-Determine and Calculate Watervans economic value

Determine and Calculate Watervans economic value added

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Reference no: EM132476257

Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT

Net sales	$893.00
Cost of goods sold	753.00
Depreciation	43.00
Earnings before interest and taxes (EBIT)	$ 97.00
Interest expense	24.00
Income before tax	$ 73.00
Taxes	15.33
Net income	$ 57.67

Assets	End of Year	Start of Year
Current assets	$ 381	$ 336
Long-term assets	282	234
Total assets	$ 663	$ 570
Liabilities and shareholders' equity
Current liabilities	$ 206	$ 169
Long-term debt	120	133
Shareholders' equity	337	268
Total liabilities and shareholders' equity	$ 663	$ 570
The company's cost of capital is 8.5%.

Above balance sheet table:

The company's cost of capital is 8.5%.

Question a. Calculate Watervan's economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Question b. What is the company's retum 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.)

Question 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.)

Question d. Is the company creating value for its shareholders?

Reference no: EM132476257

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Determine and Calculate Watervans economic value added

Reference no: EM132476257

Reference no: EM132476257

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