Waldorf Company has two sources of funds: long-term debt with a market and book value of $5,200,000 issued at an interest rate of 13%, and equity capital that has a market value of $4,200,000 (book value of $2,400,000). Waldorf Company has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 13%, while the tax rate is 25%.

What is the EVA® for Cedar Rapids? (Round intermediary calculations to four decimal places.)
A) $275,720
B) $465,000
C) $430,720
D) $241,000

Question

Waldorf Company has two sources of funds: long-term debt with a market and book value of $5,200,000 issued at an interest rate of 13%, and equity capital that has a market value of $4,200,000 (book value of $2,400,000) . Waldorf Company has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 13%, while the tax rate is 25%.

What is the EVA® for Cedar Rapids? (Round intermediary calculations to four decimal places.)

What is the EVA® for Cedar Rapids? (Round intermediary calculations to four decimal places.)
A) $275,720 
B) $465,000 
C) $430,720 
D) $241,000

Quizplus · Accepted Answer

Cedar Rapids () = ($620,000 × (1 - 0.25)) - [0.1120 × ($2,000,000 - $310,000)]
= $275,720

Waldorf Company Has Two Sources of Funds: Long-Term Debt with a Market