USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following information on Kayray Corporation. Your ultimate objective is to calculate the EVA for the firm.

-Refer to Exhibit 9.15. Calculate the capital for the firm.
A) 1725
B) 1953
C) 2524
D) 2385
E) 1987

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following information on Kayray Corporation. Your ultimate objective is to calculate the EVA for the firm.
 
-Refer to Exhibit 9.15. Calculate the capital for the firm.
A) 1725 
B) 1953 
C) 2524 
D) 2385 
E) 1987

Quizplus · Accepted Answer

The formula for calculating capital (K) is K = BV of Debt + MV of Equity. 
Using the information from the exhibit, we have: 
BV of Debt = 775
MV of Equity = 1610 + (0.67 x 945) = 2216.15
Therefore, K = 775 + 2216.15 = 2991.15
However, we need to adjust for non-operating assets and liabilities, which are given to be 605. 
Thus, the capital for the firm is K = 2991.15 - 605 = 2386.15, which rounds to 2385. Hence, the best choice is D) 2385.