The following information relates to Hudston, Inc.: $$\begin{array} { l r }
\text { Total assets } & \$ 9,000,000 \
\text { After-tax operating income } & 1,500,000 \
\text { Current liabilities } & 800,000
\end{array}$$ If the company has a 10% weighted-average cost of capital, its economic value added would be:
A) $(200,000).
B) $530,000.
C) $680,000.
D) $970,000.
E) None of the other answers are correct.

Question

The following information relates to Hudston, Inc.: $$\begin{array} { l r } 
\text { Total assets } & \$ 9,000,000 \
\text { After-tax operating income } & 1,500,000 \
\text { Current liabilities } & 800,000
\end{array}$$ If the company has a 10% weighted-average cost of capital, its economic value added would be:
A) $(200,000).
B) $530,000.
C) $680,000.
D) $970,000.
E) None of the other answers are correct.

Quizplus · Accepted Answer

EVA = After-tax operating income - (Total assets x Weighted-average cost of capital)= 1,500,000 - (9,000,000 x 0.10)= 1,500,000 - 900,000= $600,000

The Following Information Relates to Hudston, Inc If the Company Has a 10% Weighted-Average Cost of Capital