For 2011, Everyday Electronics reported $22.5 million of sales and $18 million of operating
costs (including depreciation). The company has $15 million of investor-supplied operating
capital. Its weighted average cost of capital is 9% and its federal-plus-state income tax rate was
35%. What was the firm\'s Economic Value Added (EVA), that is, how much value did
management add to stockholders\' wealth during 2011?
Solution
EVA = [$22500000 - 18000000] * {1 - 0.35} - [$15000000 *0.09]
= 2925000 - 1350000
= $1575000.
For 2011, Everyday Electronics reported $22.5 million of sales and $1.pdf
1. For 2011, Everyday Electronics reported $22.5 million of sales and $18 million of operating
costs (including depreciation). The company has $15 million of investor-supplied operating
capital. Its weighted average cost of capital is 9% and its federal-plus-state income tax rate was
35%. What was the firm's Economic Value Added (EVA), that is, how much value did
management add to stockholders' wealth during 2011?
Solution
EVA = [$22500000 - 18000000] * {1 - 0.35} - [$15000000 *0.09]
= 2925000 - 1350000
= $1575000
![For 2011, Everyday Electronics reported $22.5 million of sales and $18 million of operating
costs (including depreciation). The company has $15 million of investor-supplied operating
capital. Its weighted average cost of capital is 9% and its federal-plus-state income tax rate was
35%. What was the firm's Economic Value Added (EVA), that is, how much value did
management add to stockholders' wealth during 2011?
Solution
EVA = [$22500000 - 18000000] * {1 - 0.35} - [$15000000 *0.09]
= 2925000 - 1350000
= $1575000](https://image.slidesharecdn.com/for2011everydayelectronicsreported22-230325082342-9d040bb5/85/For-2011-Everyday-Electronics-reported-22-5-million-of-sales-and-1-pdf-1-320.jpg)
