Correll Company has two divisions, A and B.Information for each division is as follows:
- What is EVA for Division B?
A) $144,000
B) $116,000
C) $216,000
D) $44,000

Question

Correll Company has two divisions, A and B.Information for each division is as follows: 
- What is EVA for Division B?
A) $144,000 
B) $116,000 
C) $216,000 
D) $44,000

Quizplus · Accepted Answer

EVA for Division B can be calculated as Operating Income - (Capital Employed x Weighted Average Cost of Capital). 
Operating Income for Division B = $160,000 - $80,000 = $80,000 
Capital Employed for Division B = $500,000 
Weighted Average Cost of Capital for Division B = (0.6 x 10%) + (0.4 x 12%) = 10.8%
EVA = $80,000 - ($500,000 x 10.8%) = $116,000. 
Therefore, the answer is B as it correctly represents the EVA for Division B.

Correll Company Has Two Divisions, a and B