Reference no: EM132523507

Here are simplified financial statements for Watervan Corporation:

INCOME STATEMENT(Figures in $ millions)

Net sales$899.00

Cost of goods sold 759.00

Depreciation 49.00

Earnings before interest and taxes (EBIT)$91.00

Interest expense 30.00

Income before tax$61.00

Taxes 12.81

Net income$48.19

BALANCE SHEET(Figures in $ millions)

End of Year /Start of Year

Assets

Current assets $387-----$348

Long-term assets 294-----240

Total assets $681-----$588

Liabilities and shareholders' equity

Current liabilities $212-----$175

Long-term debt 126-----139

Shareholders' equity 343-----274

Total liabilities and shareholders' equity $681-----$588

The company's cost of capital is 8.5%.

a. Calculate Watervan's economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the company's return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

d. Is the company creating value for its shareholders?