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 35%.

What is the EVA^® for St.Louis? (Round intermediary calculations to four decimal places. )

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 35%.

What is the EVA^® for St.Louis? (Round intermediary calculations to four decimal places. )

Quizplus · Accepted Answer

WACC = [(0.13 × (1 - 0.35)× $5,200,000)+ (0.13 × $4,200,000)] / $9,400,000 = 0.1048
St.Louis ()= ($480,000 × (1 - 0.35))- [0.1048 × ($2,600,000 - $110,000)] = $312,000 - $260,952 = $51,048
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Waldorf Company Has Two Sources of Funds: Long-Term Debt with a Market