The Cost of Capital for 2017 is 10% Use this information to anvaver the are cond

Question

The Cost of Capital for 2017 is 10% Use this information to anvaver the are condensed data fromm the financial statements of Gallo cy for 2617 and 2016 Balance Sheet Total current assets 2912 Property, plant, and equipment 82.309 s 80,080 (net of accumulated depreciation) Other assets 303 3438 1,061 Total assets si49S01 146-421 Total current liabilities $ 33,928 28,668 Long-term debt 20,491 S 58,593 140S01 25,676 S 59,552 S146-471 Deferred income taxes and contingencies Total liabilities Total stockholders' equity Total liabilities and stockholders' equity Income Statement 2016 209.203 14306 Net sales Cost of sales Gross profit Selling. general, and administrative expenses Other income (expense) Income (loss) before income taxes Income tax expense Net income (loss) 104.284 $ 69,922 S 82,978 3,520 63,895 $ 19,776 s_16242 16,284 2.388 13.896 Required: What is the EVA (Economic Value Added) for Gallo Factory for the end of December 2017? Brewer, Introduction to Managerial Accounting, 3le

Explanation / Answer

EVA = net operating income after taxes -( capital * cost of capital)

Capital i.e. stock holder equity=90,908

Cost of capital= 10%

Net operating income after taxes= 16242

EVA= 16242-(90908*10%)

Eva=16242-9090.8

Eva= 7152

They are other formulas to calculate eva

One more formula is

EVA=(r-k)*A

R=operating return on assets

K=total cost of capital

A= TOTal assets or capital

R=16242/149501=0.1087

K= 10.00

A=149501

Eva=(10.86%-10.00)*149501

EVA=0.86%*149501

EVA=1285.7

Follow preferably first method

Have a nice day.

Best of luck.

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