EVA
Barton Industries has operating income for the year of $3,200,000 and a 39% tax rate. Its total invested capital is $20,000,000 and its after-tax percentage cost of capital is 5%. What is the firm's EVA?
$
Economic Value added (EVA)=Net Operating Profit After Taxes(NOPAT) - (Invested Capital)*(Cost of Capital)
Operating Income=$3,200,000
Tax Rate=0.39
Tax expenses=$3,200,000*0.39=
| $1,248,000 |
Net Operating Profit After Taxes(NOPAT)=$3,200,000-$1,248,000=
| $1,952,000 |
Invested capital=$20,000,000
Cost of Capital=5%=0.05
EVA=$1,952,000-($20,000,000*0.05)=$1,952,000-$1,000,000=
| $952,000 |
| Economic Value Added (EVA) | $952,000 |
EVA Barton Industries has operating income for the year of $3,200,000 and a 39% tax rate....