12) )Compute the July 2014 cost of capital (rounded to nearest percent) for an investment center with the following information: Pre-tax operating income for July 2014    $15,500,000 Assets at July 31, 2014                                                  $8,200,000 Current liabilities at July 31, 2014                              $3,200,000 Long-term liabilities at July 31, 2014                         $2,200,000 Income tax expense for July 31, 2014                       $5,500,000 EVA                                                                                   $9,500,000 Solution Stockholder\'s Equity = Assets - Current Liabilities - Lon Term Liabilities Stockholder\'s Equity = 8,200,000 - 3,200,000 - 2,200,000 = $2,800,000 After Tax Operating Income = 15,500,000 - 5,500,000 = $10,000,000 EVA = After Tax Operating Income - Cost of Capital Cost of Capital = 10,000,000 - 9,500,000 = $500,000 Cost of Capital in % = 500,000 / 2,800,000 = 17.86% .

1. 12) )Compute the July 2014 cost of capital (rounded to nearest percent) for an investment center
with the following information:
Pre-tax operating income for July 2014 $15,500,000
Assets at July 31, 2014 $8,200,000
Current liabilities at July 31, 2014 $3,200,000
Long-term liabilities at July 31, 2014 $2,200,000
Income tax expense for July 31, 2014 $5,500,000
EVA $9,500,000
Solution
Stockholder's Equity = Assets - Current Liabilities - Lon Term Liabilities
Stockholder's Equity = 8,200,000 - 3,200,000 - 2,200,000 = $2,800,000
After Tax Operating Income = 15,500,000 - 5,500,000 = $10,000,000
EVA = After Tax Operating Income - Cost of Capital
Cost of Capital = 10,000,000 - 9,500,000 = $500,000
Cost of Capital in % = 500,000 / 2,800,000 = 17.86%