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16 December, 06:09

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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  1. 16 December, 07:45
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    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
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Home » Business » 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%.
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