Part I. East Valley Manufacturing had gross profit of $450,000 and selling & adm

Question

Part I.

East Valley Manufacturing had gross profit of $450,000 and selling & administrative expenses of $275,000 last year. The company also began last year with $1,800,000 of operating assets and ended the year with $1,500,000 of operating assets.

Calculate Return on Investment for East Valley Manufacturing.

Part II.

Saguaro Boat Engines had sales of $6,400,000, cost of goods sold of $4.8 million, and selling & administrative expenses of $650,000 for its most recent year of operation. The company%u2019s tax rate is 40%. The total Capital Employed by the firm is $5,000,000. The following information is also available.

                          Debt/Stock      Int Rate

Long-Term Debt            $1,000,000         12%

Common Stock              $3,000,000          8%

1.    In good order and form, prepare an income statement for Saguaro.

2.    Calculate EVA.

Explanation / Answer

CALCULATION OF wacc

=(0.12*(1000000/4000000))+(.08*(3000000/4000000))=9%

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