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Economic value-added method

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Reference no: EM132795937

Andy Ltd is considering investment in a project with below details. Analyse this investment using Economic Value-Added Method (EVA) only:

  • It is a three-year project with initial investment of $9 Million, depreciating over three years using straight line method with zero salvage (residual) value at the end of year three.
  • Estimated EBITDA for years 1-3 are $5 Million, $5.5 Million, and $6 Million, respectively with WACC 8% and tax rate 30%.
  • Increases in net working capital investment each year is 15% of previous year end net invested capital.

Reference no: EM132795937

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