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had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year

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abiolataiwo2015

Answer:

$1,503.75

Explanation:

Sales $12,500

Operating costs $7,025

Operating income (EBIT) $5,475

WACC 9.5%

Tax rate 40%

Investor-supplied capital $18,750

EVA = EBIT(1 - T) - Investor Capital × WACC

EVA = $3,285.00 -$1,781.25

EVA = $1,503.75

Therefore the management add $1,503.75 value to stockholders' wealth during the year.

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