Here are simplified financial statements for WatervanCorporation:
|
| INCOMESTATEMENT |
| (Figures in $millions) |
| Net sales | $ | 888.00 |
| Cost of goods sold | | 748.00 |
| Depreciation | | 38.00 |
| Earnings before interest and taxes (EBIT) | $ | 102.00 |
| Interest expense | | 19.00 |
| Income before tax | $ | 83.00 |
| Taxes | | 29.05 |
| Net income | $ | 53.95 |
|
| BALANCE SHEET |
| (Figures in $ millions) |
| End of Year | | Start of Year |
| Assets | | | | | | | |
| Current assets | $ | 376 | | | $ | 326 | |
| Long-term assets | | 272 | | | | 229 | |
| Total assets | $ | 648 | | | $ | 555 | |
| Liabilities and shareholders’ equity | | | | | | | |
| Current liabilities | $ | 201 | | | $ | 164 | |
| Long-term debt | | 115 | | | | 128 | |
| Shareholders’ equity | | 332 | | | | 263 | |
| Total liabilities and shareholders’ equity | $ | 648 | | | $ | 555 | |
|
The company’s cost of capital is 8%.
a. Calculate Watervan’s economic value added(EVA). (Do not round intermediate calculations. Enter youranswer in millions rounded to 2 decimal places.)
b. What is the company’s return on capital?(Use start-of-year rather than average capital.) (Do notround intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)
c. What is its return on equity? (Usestart-of-year rather than average equity.) (Enter youranswer as a percent rounded to 2 decimal places.)
