What is the EVA for Wichita

ACCOUNTING

Multiple Choice

Waldorf Company has two sources of funds: long-term debt with a market and book value of $10 million issued at an interest rate of 12%, and equity capital that has a market value of $8 million (book value of $4 million). Waldorf Company has profit centers in the following locations with the following operating incomes, total assets, and total liabilities. The cost of equity capital is 12%, while the tax rate is 25%.


Operating

Income

Assets

Current

Liabilities

St. Louis

$ 960,000

$ 4,000,000

$ 200,000

Cedar Rapids

$1,200,000

$ 8,000,000

$ 600,000

Wichita

$2,040,000

$12,000,000

$1,200,000


What is the EVA for Wichita?

a. $450,000

b. $1,530,000

c. $414,360

d. $1,115,640

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