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EVA Briggs & Stratton problem 10.30

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Problem 10: 30 - EVA at Briggs & Stratton

Briggs & Stratton Corporation is the world's largest maker of air-cooled gasoline engines for outdoor power equipment. The company's engines are used by the lawn and garden equipment industry. According to the company's annual report, the " management subscribes to the premise that the value of Briggs & Stratton is enhanced if the capital invested in its operations yields a cash return that is greater than that expected by the providers of capital".
The following data are for Briggs & Stratton's 2008 annual report with operating profit and average capital adjusted to reflect the capitalization of R & D and the use of FIFO inventories (thousands of dollars).

2007 2008
Adjusted before tax operating profit $ 71,460 $52,190
Cash taxes 10,853 30,424
Adjusted average invested capital 1,687,082 1,652,321
Cost of capital 9.4% 9.9%

1. Compute the EVA for Briggs & Stratton for 2007 and 2008
2. Did Briggs & Stratton's overall performance improve from 2007 to 2008? Explain

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EVA Briggs and Stratton problems are examined.

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