Cornwall Company has two divisions, A and B. Information for each division is as follows: What is EVA for Division A?
A) $40,000
B) $28,000
C) $15,000
D) $25,000

Question

Cornwall Company has two divisions, A and B. Information for each division is as follows:  What is EVA for Division A?
A) $40,000 
B) $28,000 
C) $15,000 
D) $25,000

Quizplus · Accepted Answer

EVA = NOPAT - (WACC * Capital)
For Division A:
NOPAT = $120,000 - ($300,000 * 0.10) = $90,000
Capital = $500,000
WACC = 0.12
EVA = $90,000 - (0.12 * $500,000) = $28,000

Therefore, the correct choice is B.

Cornwall Company Has Two Divisions, a and B