Reference no: EM132600056
For the physical year ending January 31, 2012, Target's EBIT was $5,322 million, and its tax rate was 34.3 percent. Its short-term borrowings were $3,786, and its long-term debt was $13,697. In addition, the firm's book value of equity was $15,821.
Additionally, Target had total revenues of in 2011 of $67,390 million, net earnings of $2,920 million. Its total assets in 2011 were $43,705 million, and its equity was $15,487 million.
In 2012, Target had total revenues of $69,865 million, net earnings of $2,929 million. Its total assets were $46,630 million, and its equity was $15,821 million.
According to its annual report, as of January 31, 2012, Target's borrowing costs averaged 4.6 percent, and its tax rate was 34.27 percent. Cost of capital is 10.5 percent. Interest barring debt is $17,483 million. Stock is trading at $50.81 per share. There are 679.1 million shares outstanding Target's amount of debt is also a market value estimate of the debt. Current debt and equity values are at Target's optimal capital structure.
Take Target's EBIT(NOPAT), invested capital (the book value of equity plus interest-bearing debt), cost of capital, and market value of equity to answer the following questions:
Question 1: Estimate Target's EVA for the year that ended on January 31, 2012.
Question 2: Was Target adding value?
Question 3: Did Target have a positive market value added or MVA?
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