Here are simplified financial statements for Watervan Corporation INCOME STATEME

Question

Here are simplified financial statements for Watervan Corporation INCOME STATEMENT (Figures in s millions) Net sales Cost of goods sold Depreciation Earnings before interest and taxes (EBIT) Interest expense Income before tax Taxes Net income $ 881 741 3 1 $ 109 12 $ 97 34 S 63 BALANCE SHEET (Figures in millions) End of Start Year of Year Assets $ 369 312 Current assets Lonq-term assets 258 Total assets 627 534 Liabilities and shareholdersequity Current liabilities Long-term debt Shareholders' equity 194 157 108 325256 121 Total liabilities and shareholders' equity S627 534

Explanation / Answer

1 EVA = NOPAT - (Kc x Capital invested at t-1) NOPAT - Net operating profit after tax EBIT 109 Less Tax = 34/97 x 109 = 38.20619 NOPAT 70.79381 Kc= 8.50% Cap Invastsed at the beginning= Debt 121 Equity 256 377 EVA = 70.7938 - (377 x 8.5%) = 38.74881 2 Return on capital = EBIT/ Capital employed = 109/377 X 100 = 28.91% 3 Return on equity = Net income/ equity outstanding Equity = 256 Net income = 63 ROE = 24.61% Please provide feedback…. Thanks in advance…. :-)

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