Barton Industries has operating income for the year of $3,700,000 and a 25% tax rate. Its total invested capital is $18,000,000 and its after-tax percentage cost of capital is 5%. What is the firm's EVA? Round your answer to the nearest dollar, if necessary.

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25 October, 15:16

Barton Industries has operating income for the year of $3,700,000 and a 25% tax rate. Its total invested capital is $18,000,000 and its after-tax percentage cost of capital is 5%. What is the firm's EVA? Round your answer to the nearest dollar, if necessary.

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Jovan Shaw · Answer 1

1,875,000 Economic Value Added

Explanation:

Net Operating Profit After Taxes - Invested Capital x Weighted Average Cost of Capital = Economic Value added

This represent the return on the shareholders after their investment return is paid. It is the value generated from the investent resources.

3,700,000 x (1 - 0.25) = 2,775,000 Operating Income after taxes

18,000,000 x 5% = (900,000) Required Return

1,875,000 Economic Value Added