Computing EVA and Comparing Performance
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A company that uses EVA reported the following results for 20X4 and 20X5 (in millions):
..............................................20X4............20X5
Pretax operating Income.......5,698...........5,700
Cash Taxes...........................1,676...........1,600
Average adjusted invested capital was $20,308 million in 20X4 and $18,091 million in 20X5, and the cost of capital was 9% in both 20X4 and 20X5.
1. Compute the Company's EVA for 20X4 and 20X5.
2. Compare the company's performance in creating value for its shareholders in 20X5 with that in 20X4.
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Solution Summary
This solution provides the correct calculations with explanations to the EVA questions listed. Includes 1 reference.
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The calculation for EVA = NOPAT - (Captial x cost of capital)
We can therefore input actual figures into our calculation.
5,698 1676 = 4,022 - (20,308 x .09) =
4022 - 1827.72 = ...
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