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26 March, 14:03

Falconer Company had net (after-tax) income last year of $14,107,956 and total capital employed of $131,869,720. Falconer's actual cost of capital was 12%.

Required:

1. Calculate the EVA for Falconer Company. Enter negative values as negative numbers, if required. Round your answer to the nearest dollar. $

2. Conceptual Connection: Is Falconer creating or destroying wealth?

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Answers (1)
  1. 26 March, 15:13
    0
    1. - $1,716,410.40

    2. destroying wealth

    Explanation:

    The formula to compute EVA is shown below:

    1. = Net operating income or earnings after taxes - (total capital employed * actual cost of capital)

    = $14,107,956 - ($131,869,720 * 12%)

    = $14,107,956 - $15,824,366.40

    = - $1,716,410.40

    2. As we see that the amount comes in negative that represent the wealth is destroyed
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