Purchase Solution

Determining Lake's EVA and MVA

Not what you're looking for?

Ask Custom Question

EBITDA $120 million
Depreciation expensive $20 million
Net Income $7 million
Capital Investment $300 million
Book value of equity capital $200 million
No. of shares of common stock outstanding $5 million
Tax rate $40 percent
Cost of Capital $10 percent
Market price per share of common stock $ 30
a) Determine Lakes's EVA
b) Determine Lake's MVA
c) Explain the difference between EVA and MVA.

Purchase this Solution

Solution Summary

The solution explains how to calculate the EVA and MVA and the difference between the two.

Solution Preview

a) EVA = NOPAT - Cost of Capital X Capital Investment
NOPAT = Net Operating Profit After Tax = EBIT X (1-Tax Rate)
EBIT = EBITDA - Depreciation = 120-20 = $100 million
NOPAT = 100 X (1-0.4) = $60 million
Capital Investment = 300 million
Cost of Capital = 10%
EVA = 60 - 10% ...

Purchase this Solution


Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Basics of corporate finance

These questions will test you on your knowledge of finance.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.