Compute the May 20xx EVA for an investment center with the following information: $\begin{array}{lr}
\text { Pre-tax operating income for May 20xx } & \$ 18,000,500 \
\text { Income tax expense for May 20xx } & 5,100,000 \
\text { Assets at May 31, 20xx } & 13,200,500 \
\text { Current liabilities at May 31, 20xx } & 10,000,000 \
\text { Long-term liabilities at May 31, 20xx } & 3,500,000 \
\text { Minimum desired rate of return } & 20 \%
\end{array}$
Minimum desired rate of return 20%

Question

Compute the May 20xx EVA for an investment center with the following information: $\begin{array}{lr}
\text { Pre-tax operating income for May 20xx } & \$ 18,000,500 \
\text { Income tax expense for May 20xx } & 5,100,000 \
\text { Assets at May 31, 20xx } & 13,200,500 \
\text { Current liabilities at May 31, 20xx } & 10,000,000 \
\text { Long-term liabilities at May 31, 20xx } & 3,500,000 \
\text { Minimum desired rate of return } & 20 \%
\end{array}$
 Minimum desired rate of return 20%

Quizplus · Accepted Answer

EVA = (NOPAT - (Required return * Capital employed))NOPAT = Pre-tax operating income - Income tax expense= 18,000,500 - 5,100,000= 12,900,500Capital employed = Assets - Current liabilities - Long-term liabilities= 13,200,500 - 10,000,000 - 3,500,000= 13,200,500 - 13,500,000= -299,500Required return = Minimum desired rate of return * Capital employed= 20% * -299,500= -59,900EVA = 12,900,500 - (-59,900)= 12,900,500 + 59,900= 12,960,400

Compute the May 20xx EVA for an Investment Center with the Following