Use the information below to answer the following question(s).Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent; and, equity capital that has a market value of $6 million (book value of $2 million).The cost of equity capital is 5 percent, while the tax rate is 30 percent.Brandorf Company has profit centres in the following locations with the following data:

-What is EVA for Ottawa?
A)$218,200
B)$362,200
C)$163,200
D)$480,000
E)$140,000

Question

Use the information below to answer the following question(s).Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent; and, equity capital that has a market value of $6 million (book value of $2 million).The cost of equity capital is 5 percent, while the tax rate is 30 percent.Brandorf Company has profit centres in the following locations with the following data:
 
-What is EVA for Ottawa?
A)$218,200 
B)$362,200 
C)$163,200 
D)$480,000 
E)$140,000

Quizplus · Accepted Answer

EVA is calculated as NOPAT - (WACC * Capital Employed). NOPAT is given as $480,000, WACC is 10%, and Capital Employed is $362,200. Therefore, EVA = $480,000 - (0.10 * $362,200) = $218,200.

Use the Information Below to Answer the Following Question(s)