Reference no: EM132475657
Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT(Figures in $ millions)Net sales $883.00
Cost of goods sold 743.00
Depreciation 33.00
Earnings before interest and taxes (EBIT) $107.00
Interest expense 14.00
Income before tax $93.00
Taxes 19.53
Net income $73.47
BALANCE SHEET(Figures in $ millions) End of Year Start of Year
Assets Current assets $371 $316
Long-term assets 262 224
Total assets $633 $540
Liabilities and shareholders' equity Current liabilities $196 $159
Long-term debt 110 123
Shareholders' equity 327 258
Total liabilities and shareholders' equity $633 $540
The company's cost of capital is 8.5%.
Quetsion a. Calculate Watervan's economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Quetsion 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.)
Quetsion 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.)
Quetsion d. Is the company creating value for its shareholders?