Figure 19-2
The following results for the year pertain to the Northern Division of Garvey Ltd.: $\begin{array}{lr}
\text { Sales } & £ 400,000 \
\text { Taxes } & 60,000 \
\text { Operating income after taxes } & 160,000
\end{array}$
-Refer to Figure 19-2. Northern's total capital employed is £1,200,000, and their weighted average cost of capital is 12 per cent. Economic value added for the Northern Division is
A)£240,000.
B)£144,000.
C)(£104,000).
D)£16,000.

Question

Quizplus · Accepted Answer

Economic Value Added (EVA) is calculated as Operating Income After Taxes minus the product of Total Capital Employed and the Weighted Average Cost of Capital. Here, EVA = £160,000 - (£1,200,000 * 12%) = £160,000 - £144,000 = £16,000.

Figure 19-2 the Following Results for the Year Pertain to the Northern

Figure 19-2
the Following Results for the Year Pertain to the Northern