Which performance measure evaluates to what extent managers perform their primar

Question

Which performance measure evaluates to what extent managers perform their primary task-that is, to create shareholder wealth? Economic value added Market value added Consider this case: Last year, Jackson Tires reported net sales of $40 million and total operating costs (including depreciation) of $26 million. Jackson Tires has $75 million of investor-supplies capital, which has an after-tax cost of 12.5% If Jackson Tires's tax rate is 40%, how much value did its management create or lose the firm during the year? -$0.27 million $14.63 million #35.63 million -$0.98 million According to Jackson Tires's balance sheet, the firm has $90 million of total common equity (common stock plus retained earnings). The firm has 10 million shares of common stock outstanding, and the current stock price is $25.00. What is Jackson Tires's current MVA? $136 million $160 million $192 million $251 million

Explanation / Answer

Current MVA = 25*10-90

= $ 160 Million

1 Market Value Added Market Value Added is the measure of the Shareholders Wealth 2 Sales 40 Operating Cost 26 Operating Income 14 Less: Tax 5.6 Interest 9.375 Loss -0.975 The correct answer is D. -$ .98 Million

Current MVA = 25*10-90

= $ 160 Million

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