Coldbrook Company has two sources of funds: long-term debt with a market and book value of $19,000,000 issued at an interest rate of 11%,and equity capital that has a market value of $7,000,000 (book value of $5,000,000) .Coldbrook Company has profit centers in the following locations with the following operating incomes,total assets,and current liabilities.The cost of equity capital is 16%,while the tax rate is 35%.

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

Question

Coldbrook Company has two sources of funds: long-term debt with a market and book value of $19,000,000 issued at an interest rate of 11%,and equity capital that has a market value of $7,000,000 (book value of $5,000,000) .Coldbrook Company has profit centers in the following locations with the following operating incomes,total assets,and current liabilities.The cost of equity capital is 16%,while the tax rate is 35%.

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

Quizplus · Accepted Answer

WACC = [(0.11 × (1 - 0.35)× $19,000,000)+ (0.16 × $7,000,000)] / $26,000,000 = 0.0953
Brooksville ()= ($1,100,000 × (1 - 0.35))- [0.0953 × ($5,300,000 - $1,200,000)]
 11ea8a5a_9f98_eb34_a19c_a9a05b941d13_TB5540_00_TB5540_00_TB5540_00 = $324,270

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