Use the information below to answer the following question(s):
Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 7%. Its effective tax rate is 30%.

-What is the First Electronics Corporation cell phone division's Economic Value Added (EVA)?
A) $157,500
B) $472,500
C) $600,000
D) $630,000

Question

Use the information below to answer the following question(s):
Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 7%. Its effective tax rate is 30%.
 
-What is the First Electronics Corporation cell phone division's Economic Value Added (EVA)?
A) $157,500 
B) $472,500 
C) $600,000 
D) $630,000

Quizplus · Accepted Answer

B) ($900,000 × 0.7) - [($3,000,000 - $750,000) × 7%] = $472,500

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