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Estimate the eva by the firm in 2020

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West Island Inc. has asked you to compute the economic value added (EVA) by the firm in 2020.The firm had a book value of equity at the end 2020 of $1.2 million and a book value of debt of $2.3 million. During 2020, the firm reported operating income of $750,000, prior to taxes. The firm's tax rate is 35%. The firm has a beta of 1.1, a pre-tax cost of borrowing of 7%, and a market debt to equity ratio of 3. The riskless rate is 6.5%, and the market risk premium (MRP) is 5.5%. Estimate the EVA by the firm in 2020.

Reference no: EM133003201

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