How should this fact change your calculation of eva

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Reference no: EM133023016

Question - The table below shows a condensed income statement and balance sheet for Androscoggin Copper's Rumford smelting plant (figures in $ millions). Assume the cost of capital is 9%.

Income Statement for 2018 Assets, December 31, 2018 Revenue $57.46 Net working capital $7.00 Raw materials cost 18.64 Operating cost 21.01 Investment in plant and equipment 70.13 Depreciation 4.42 Less accumulated depreciation 21.09 Pretax income $13.39 Net plant and equipment $49.04 Tax at 21% 2.81 Net income $10.58 Total assets $56.04

Required -

a. Calculate the plant's EVA.

b. As the table above shows, the plant is carried on Androscoggin's books at $49.04 million. However, it is a modern design, and could be sold to another copper company for $103 million. How should this fact change your calculation of EVA?

Reference no: EM133023016

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