Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Springfield has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year: Calculate EVA® for the Gold Division.
A)($283,200)
B)($82,560)
C)$196,800
D)$397,440

Question

Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Springfield has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year:  Calculate EVA® for the Gold Division.
A)($283,200) 
B)($82,560) 
C)$196,800 
D)$397,440

Quizplus · Accepted Answer

The Answer of Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Springfield has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year:  Calculate EVA® for the Gold Division.
A)($283,200) 
B)($82,560) 
C)$196,800 
D)$397,440

Springfield Corporation, Whose Tax Rate Is 40%, Has Two Sources