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    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.

    © BrainMass Inc. brainmass.com June 4, 2020, 3:39 am ad1c9bdddf
    https://brainmass.com/business/accounting/computing-eva-comparing-performance-526811

    Solution Preview

    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 = ...

    Solution Summary

    This solution provides the correct calculations with explanations to the EVA questions listed. Includes 1 reference.

    $2.19

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