Calculate Watervan’s economic value added (EVA). (Do not round intermediate calc

Question

Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

Explanation / Answer

a. Economic value added = ($90 - $31) - [($344 + $256)/2) * 8%]

= $59 - $24

= $35

b. Return on capital = $90 - $31 / $300 * 100

= 19.67%

c. Return on equity = ($31 / $256 ) * 100

= 12.11%.

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