MVC Inc. for year 2017 had $20m in revenues, and operating expenses (incl. depreciation) of $17m....
MVC Inc. for year 2017 had $20m in revenues, and operating expenses (incl. depreciation) of $17m. With an opportunity cost of capital of 9%, and corp. tax rate of 35%, it invested $15m. How much economic value did it add during the year?
Select one:
a. $600,000
b. $500,000
c. $1.35m
d. $1.95m
e. None of the Above
Homework Answers
Economic Value Added
It refers to the economic profit of a firm. In other words, Economic value addition is an excess earning of firm over the required return of the Firm.
Thus,
Where,
WACC = weighted average cost of capital (opportunity cost)
We have following information -
Revenue = $ 20,000,000
Operating expenses = $ 17,000,000
Tax rate = 35%
Opportunity cost (WACC) = 9%
Profit after tax = (20,000,000 - 17,000,000)*(1-0.35)
= 3,000,000*0.65
= $ 1,950,000
Thus,
Economic value added = 1,950,000 - (15,000,000*0.09)
= 1,950,000 - 1,350,000
= $ 600,000
Therefore, option-a is correct i.e $ 600,000
Add Answer to:
MVC Inc. for year 2017
had $20m in revenues, and operating expenses (incl. depreciation)
of $17m....
not sure how to do this Champagne, Inc., had revenues of $12 million, cash operating expenses...
not sure how to do this
Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and amortization of $1.5 million during 2008. The firm purchased $700,000 of equipment during the year while increasing its inventory by $500,000 (with no corresponding increase in current liabilities). The marginal tax rate for Champagne is 30 percent. Free cash flow: What is Champagne's cash flow from operations for 2008? $3,250,000 $4,000,000 $2,500,000 $2,050,000
Lowell Inc. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The company had...
Lowell Inc. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year?
7. HHH Inc. reported $32,000 of sales and $8,700 of operating costs (including depreciation). The company had $16,000 of...
7. HHH Inc. reported $32,000 of sales and $8,700 of operating costs (including depreciation). The company had $16,000 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 12.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year? a. $14,256 b. $13,100 c. $12,005 d. $11,980 Arshadi Corp.'s sales last year were $52,000, and its...
This year, FCF, Inc. Has earnings before interest and taxes of $10 million, depreciation expenses of...
This year, FCF, Inc. Has earnings before interest and taxes of $10 million, depreciation expenses of $1 million, capital expenditures of $1.5 million and has increased its net working capital by $500,000. If its tax rate is 35%, what is its free cash flow?
Amsted, Inc. is considering a project that will increase revenues by $2.5 million, cash operating expenses...
Amsted, Inc. is considering a project that will increase revenues by $2.5 million, cash operating expenses by $700,000, and depreciation and amortization by $300,000 during 2011. For this project, the firm will purchase $800,000 of equipment during the year while decreasing its inventory by $200,000 (with no corresponding decrease in current liabilities). The marginal tax rate for Amsted is 35 percent. What is this project’s incremental after-tax free cash flow for 2011? A. 475,000 B. 975,000 C. 675,000 D. 275,000
Fresno Furniture Manufacturing Inc. currently earns annual revenues of $850,000 and incurs total operating expenses (excluding...
Fresno Furniture Manufacturing Inc. currently earns annual revenues of $850,000 and incurs total operating expenses (excluding depreciation and interest expense) of 40.00% of revenues. Its earnings are taxed at a rate of 40%. Today, its budgeting committee is evaluating the purchase of a new lathe. The lathe is expected to cost $80,000, plus $4,000 in freight and setup expenses, and will be depreciated using straight-line depreciation. It is expected that the lathe will have a useful life of five years...
. The Ragin Cajun had an operating income (EBIT of $260,000 last year The firm had...
. The Ragin Cajun had an operating income (EBIT of $260,000 last year The firm had $18,000 in depreciation expenses, $15,000 in interest expenses, and S60,000 in selling, general, and administrative expenses. If the Cajun has a marginal tax rate of 40 percent, what was its net income for last year? 2 Vroom Vroom Motors is in the 40% tax bracket and has preferred stock dividends due of S3,000 and 15,000 common stock shares outstanding. Based on this information, what...
11. During 2019, its first year of operations, Aaron Inc. reported a net operating loss of...
11. During 2019, its first year of operations, Aaron Inc. reported a net operating loss of $4,000 for financial reporting and tax purpose. The enacted tax rate is 25%. In its 2019 income (loss) statement, Aaron will report a net loss of: a. $5,000 b. $3,000 C. $2,000 d. $1,000 12. At the end of 2018, HD Company had reported a deferred tax asset of $90 million with no valuation allowance. At December 31, 2019, the account balances of HD...
$164,270 GREAT ADVENTURES, INC Income Statement For the year ended December 31, 2022 Net revenues :...
$164,270 GREAT ADVENTURES, INC Income Statement For the year ended December 31, 2022 Net revenues : Expenses: Cost of goods sold $38,500 Operating expenses 51, 4ee Depreciation expense Interest expense Income tax expense 14,500 Total expenses Net income 17,250 6,785 128,435 $ 35,835 GREAT ADVENTURES, INC. Balance Sheets December 31, 2022 and 2021 2022 2021 Increase (I) or Decrease (D) $ $ 64,500 180,568 47,689 7,880 Assets Current assets: Cash Accounts receivable Inventory Other current assets Long-term assets: Land Buildings...
Sutton Inc., a small service company, keeps its records without the help of an accountant. After...
Sutton Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as at the end of the company's fiscal year, December 31, 2017: Credit $ Debit 60,000 13,000 800 1,000 20,000 $ 12,000 Account Titles Cash Accounts receivable Service supplies inventory Prepaid insurance Service trucks Accumulated depreciation, service trucks Other assets Accounts payable Note payable (three years; 5% due each December 31) Contributed capital...
not sure how to do this
Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and amortization of $1.5 million during 2008. The firm purchased $700,000 of equipment during the year while increasing its inventory by $500,000 (with no corresponding increase in current liabilities). The marginal tax rate for Champagne is 30 percent. Free cash flow: What is Champagne's cash flow from operations for 2008? $3,250,000 $4,000,000 $2,500,000 $2,050,000
Fresno Furniture Manufacturing Inc. currently earns annual revenues of $850,000 and incurs total operating expenses (excluding depreciation and interest expense) of 40.00% of revenues. Its earnings are taxed at a rate of 40%. Today, its budgeting committee is evaluating the purchase of a new lathe. The lathe is expected to cost $80,000, plus $4,000 in freight and setup expenses, and will be depreciated using straight-line depreciation. It is expected that the lathe will have a useful life of five years...
. The Ragin Cajun had an operating income (EBIT of $260,000 last year The firm had $18,000 in depreciation expenses, $15,000 in interest expenses, and S60,000 in selling, general, and administrative expenses. If the Cajun has a marginal tax rate of 40 percent, what was its net income for last year? 2 Vroom Vroom Motors is in the 40% tax bracket and has preferred stock dividends due of S3,000 and 15,000 common stock shares outstanding. Based on this information, what...
11. During 2019, its first year of operations, Aaron Inc. reported a net operating loss of $4,000 for financial reporting and tax purpose. The enacted tax rate is 25%. In its 2019 income (loss) statement, Aaron will report a net loss of: a. $5,000 b. $3,000 C. $2,000 d. $1,000 12. At the end of 2018, HD Company had reported a deferred tax asset of $90 million with no valuation allowance. At December 31, 2019, the account balances of HD...
$164,270 GREAT ADVENTURES, INC Income Statement For the year ended December 31, 2022 Net revenues : Expenses: Cost of goods sold $38,500 Operating expenses 51, 4ee Depreciation expense Interest expense Income tax expense 14,500 Total expenses Net income 17,250 6,785 128,435 $ 35,835 GREAT ADVENTURES, INC. Balance Sheets December 31, 2022 and 2021 2022 2021 Increase (I) or Decrease (D) $ $ 64,500 180,568 47,689 7,880 Assets Current assets: Cash Accounts receivable Inventory Other current assets Long-term assets: Land Buildings...
Sutton Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as at the end of the company's fiscal year, December 31, 2017: Credit $ Debit 60,000 13,000 800 1,000 20,000 $ 12,000 Account Titles Cash Accounts receivable Service supplies inventory Prepaid insurance Service trucks Accumulated depreciation, service trucks Other assets Accounts payable Note payable (three years; 5% due each December 31) Contributed capital...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago