P 2330
1. The EVA
®
formula is as follows:
Net operating profit after tax  (WACC x Invested capital assets)
In 2008:
The net operating profit after tax is $1,000,000 x (1  45%) = $550,000
The invested capital is $18,930,000  $230,000 = $18,700,000
(Invested capital = total liabilities & equity  total current liabilities)
Sperry’s EVA
®
in 2008 is as follows:
$550,000  (10% x $18,700,000) =  $1,320,000
In 2009:
The net operating profit after tax is $1,400,000 x (1  45%) = $770,000
The invested capital is $24,610,000  $110,000 = $24,500,000
(Invested capital = total liabilities & equity  total current liabilities)
Sperry’s EVA
®
in 2008 is as follows:
$770,000  (11% x $24,500,000) =  $1,925,000
2.
EVA
®
= Net operating profit after tax  (WACC x Invested capital assets)

Sperry’s operating income before interest and tax increased 40% from $1,000,000 in
2008 to $1,400,000 in 2009. Since the average tax rate remained the same in both years,
Sperry’s