Scranton Shipyards has $8.5 million in total invested operating capital,and its WACC is 10%.Scranton has the following income statement: What is Scranton's EVA? Answer options are provided in whole dollar.

Question

Quizplus · Accepted Answer

EVA (Economic Value Added) is calculated as follows: EVA = Net Operating Profit after Taxes (NOPAT) - (Total Invested Capital x WACC). From the income statement provided, we can calculate NOPAT by subtracting the taxes from EBIT. 
NOPAT = EBIT - Taxes = $3,500,000 - ($3,500,000 x 0.40) = $2,100,000 
Total invested capital is given as $8.5 million. 
EVA = $2,100,000 - ($8,500,000 x 0.10) = $2,150,000. 
Therefore, the correct answer is C, $2,150,000.

Scranton Shipyards Has $8