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Calculate the economic value added to the corporation

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Reference no: EM132529344

The MistleToe Corporation sells Christmas decorations. They had the following financial information for 2019:

Pre-Tax Operating Profit                        $6,000,000

Total Capital employed                        $12,000,000

Amount of Debt                                  $8,000,000

MV of Equity                                       $4,000,000

Pre-tax cost of debt                                 12%

Securities premium over risk-free rate                9%

Risk-Free rate                                                   6%

Tax rate                                                            35%

The MistleToe Corporation has decided to implement an EVA bonus plan for its top executives.

Question 1: Calculate the Economic Value Added (EVA) to the corporation in 2019.

Reference no: EM132529344

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