6. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 6 THROUGH 8. American Water Company, Inc. has two sources of funds: long-term debt with a market and book value of $10 million issued at an interest rate of 10%, and equity capital that has a market value of $10 million (book value of $8 million). American Water Company has subsidiaries in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity is 24%, while the combined income tax rate is 40%.
Operating Income Assets Current Liabilities
Virginia $1,960,000 $8,000,000 $500,000
North Carolina $2,200,000 $16,000,000 $600,000
South Carolina $3,040,000 $24,000,000 $800,000
What is the EVA for Virginia?
7. What is the NOPAT for North Carolina?
8. What is the weighted average cost of capital (WACC) for South Carolina?
Your tutorial with instructional comments and formulas needed is attached in Excel. Click in cells to see computations. It is a little "tricky" to ask for WACC of subsidiary when they don't have their own debt and equity issues. This is clarified.
Management (The Transformation of the Corporation) Employee capitalism
Comment on the attached article and advise -
1- What is the point the Author is making?
2- Can we Agree with his point and why or why not?