6thCh4P-EVA problem we worked in class

6thCh4P-EVA problem we worked in class - 300,000= interest;...

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ABC Co. has net income of $1,000,000, tax rate of 35%, interest  expense of $300,000, total capital of $20 million, and after tax cost  of capital of 10%.  What is ABC’s EVA? Answer to Question about  EVA 1 0.35 = T; 1,000,000=NI Since NI = EBT*(1 –T), we can find EBT from NI  1,538,461.538 = EBT = NI/(1-T)= 1,000,000/(1-.35) 
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Unformatted text preview: 300,000= interest; now we can find EBIT from EBT. 1,838,461.538 = EBIT = EBT + Interest 1,195,000.00 = NOPAT = EBIT*(1-T)= EBIT(1-.35) 2MM = .1 * $20MM = capital * % after tax cost of cap. EVA = NOPAT + [(% after tax cost of capital)*(capital)] EVA = -$805,000 = $1,195,000.00 -$2,000,000...
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