Coldbrook Company has two sources of funds: long-term debt with a market and book value of $17,000,000 issued at an interest rate of 11%,and equity capital that has a market value of $6,000,000 (book value of $5,500,000) .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 15%,while the tax rate is 35%.

What is the EVA^® for Stonybrook? (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 $17,000,000 issued at an interest rate of 11%,and equity capital that has a market value of $6,000,000 (book value of $5,500,000) .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 15%,while the tax rate is 35%.

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

Quizplus · Accepted Answer

WACC = [(0.11 × (1 - 0.35)× $17,000,000)+ (0.15 × $6,000,000)] / $23,000,000 = 0.0920
Stonybrook ()= ($2,700,000 × (1 - 0.35))- [0.0920 × ($9,600,000 - $3,400,000)]
 11ea8a5a_9f99_fca6_a19c_d37f9a0996b2_TB5540_00_TB5540_00_TB5540_00 = $1,184,600

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