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    Economic Value Added , Degree of Operating Leverage

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    1) Bendix has operating capital of $40 million and ROA of 13% on assets of $55. At what WACC would EVA be $1 million?

    2) An American manufacturer is comparing its degree of operating leverage with that of a Chinese competitor. What is DOL of the US company? What is the DOL of the Chinese Company?

    US Company
    2002 2003
    sales 150000 180000
    profits 23000 32000

    Chinese Company
    2002 2003
    sales 150000 190000
    profits 6500 7500.

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    Solution Summary

    The solution calculates the WACC for a level of EVA and the DOL for a company.