Reference no: EM132573411

Here are simplified financial statements for Watervan Corporation:

INCOME STATEMENT(Figures in $ millions)

Net sales                                               $901.00

Cost of goods sold                                    761.00

Depreciation                                            51.00

Earnings before interest and taxes (EBIT)     $89.00

Interest expense                                        32.00

Income before tax                                   $57.00

Taxes                                                          11.97

Net income                                                   $45.03

BALANCE SHEET(Figures in $ millions)

                                                             End of Year    Start of Year

Assets Current assets                           $389          $352

Long-term assets                                  298              242

Total assets                                        $687               $594

Liabilities and shareholders' equity

Current liabilities                                        $214          $177

Long-term debt                                        128              141

Shareholders' equity                                 345                240

Total liabilities and shareholders' equity       $687                   $558

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 return 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?