Share
Explore BrainMass

Economic Value-Added (EVA), Market Value-Added (MVA)

WACC, EVA & MVA
Use the selected statistics from the table below. Your company's name is Digby.
Part I:
Calculate your company's Weighted Average Cost of Capital in Year 2. In calculating cost of equity, use the CAPM. In the CAPM, use 6.0% for the risk free rate, 5.0% for the market risk premium, and assume your company is rated average in terms of financial risk, in the prime of its life cycle. Select an appropriate beta (hint: what beta reflects average risk).
Part II:
Calculate your company's Economic Value-Added (EVA) for Year 2.
Part III:
Calculate your company's Market Value-Added (MVA) for Year 2.
Part IV:
Suppose that the beta value you used in the previous parts is really an unlevered beta. Calculate the beta value that is consistent with your actual leverage. The debt beta should be assumed to be zero.
Industry F48764 selected statistics for year 2
Andrews Baldwin Chester Digby Erie Ferris
ROS 10.58% 0.00% 6.71% 7.56% 11.86% 3.47%
Asset Turnover 1.80 0.00 1.73 1.42 1.24 1.67
ROA 19.06% - 22.96% 11.62% 10.74% 14.73% 5.78%
Leverage 1.51 3.00 1.78 1.35 1.90 2.16
ROE 28.86% - 68.87% 20.67% 14.51% 28.07% 12.47%
Emergency Loans $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Sales $ 62,523,675 $ 0 $ 48,378,101 $ 43,024,448 $ 55,127,177 $ 71,388,350
Variable Costs $ 43,638,317 $ 0 $ 35,010,627 $ 32,412,248 $ 36,170,009 $ 55,338,876
SGA $ 5,564,286 $ 1,757,417 $ 5,382,231 $ 3,275,777 $ 4,882,519 $ 8,055,103
EBIT $ 11,291,072 $- 2,359,112 $ 6,104,630 $ 5,723,090 $ 12,193,291 $ 5,810,519
Profit $ 6,613,422 $- 1,963,831 $ 3,247,111 $ 3,254,745 $ 6,535,418 $ 2,476,947
Cumulative Profit $ 10,556,581 $- 3,525,824 $ 9,566,740 $ 9,875,922 $ 12,498,627 $ 7,929,018
Stock price $ 20.96 $ 1.00 $ 18.53 $ 18.42 $ 24.44 $ 15.75
Market Capitalization $ 45,672,793 $ 1,974,875 $ 36,186,417 $ 40,472,137 $ 52,488,789 $ 33,396,206
SandP Rating A C BB AAA B CCC
Working Capital $ 7,748,581 $ 0 $ 6,897,736 $ 10,062,588 $ 11,095,108 $ 7,194,037
Days of Working Capital 45.2 0.0 52.0 85.4 73.5 36.8
Free Cash Flow $- 3,556,800 $- 10,133,258 $ 756,976 $- 2,899,843 $- 3,302,501 $- 4,488,388
Plant and Equipment $ 30,450,000 $ 9,018,000 $ 24,903,200 $ 24,200,000 $ 29,700,000 $ 30,020,000
Total Assets $ 34,703,292 $ 8,551,426 $ 27,954,309 $ 30,299,943 $ 44,353,298 $ 42,819,656
Plant Utilization 198.13% 0.10% 137.04% 140.70% 198.13% 166.13%
Low End Tech Segment Share 20.69% 0.00% 18.87% 19.14% 28.60% 12.70%
High End Tech Segment Share 22.80% 0.00% 15.90% 9.55% 6.76% 44.98%
Overall Market Share 21.42% 0.00% 17.84% 15.82% 21.05% 23.87%
Complement 291 0 255 246 286 369
Overtime 0.07% -100.00% 0.22% 0.00% 0.04% 0.00%
Turnover Rate 10.01% 10.00% 10.02% 10.00% 10.00% 10.00%
Productivity Index 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Industry F48764 selected statistics for year 1
Andrews Baldwin Chester Digby Erie Ferris
ROS 2.98% 0.00% 8.33% 8.58% 6.84% 6.08%
Asset Turnover 1.95 0.20 1.88 1.77 1.86 1.59
ROA 5.81% - 28.91% 15.62% 15.19% 12.70% 9.69%
Leverage 1.54 1.59 1.47 1.42 1.91 1.85
ROE 8.94% - 46.00% 22.99% 21.56% 24.25% 17.97%
Emergency Loans $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Sales $ 48,903,529 $ 2,790,715 $ 46,043,013 $ 48,177,836 $ 50,866,274 $ 48,791,849
Variable Costs $ 40,038,930 $ 2,353,050 $ 34,813,834 $ 37,095,070 $ 38,860,159 $ 36,636,563
SGA $ 4,522,788 $ 5,781,861 $ 3,437,645 $ 2,758,513 $ 4,166,853 $ 5,122,628
EBIT $ 2,973,144 $- 5,585,097 $ 6,660,867 $ 7,134,254 $ 6,534,005 $ 5,856,658
Profit $ 1,457,972 $- 4,047,179 $ 3,834,443 $ 4,135,990 $ 3,478,022 $ 2,966,885
Cumulative Profit $ 3,943,159 $- 1,561,993 $ 6,319,629 $ 6,621,177 $ 5,963,209 $ 5,452,071
Stock price $ 12.47 $ 1.31 $ 17.08 $ 17.36 $ 16.36 $ 15.31
Market Capitalization $ 27,182,891 $ 2,626,842 $ 34,153,330 $ 38,148,506 $ 32,727,649 $ 31,567,356
SandP Rating A A AA AA B BB
Working Capital $ 8,541,826 $ 13,987,207 $ 7,075,096 $ 14,061,177 $ 8,059,204 $ 8,772,067
Days of Working Capital 63.8 0.0 56.1 106.5 57.8 65.6
Free Cash Flow $ 26,527 $ 8,164,534 $ 365,448 $ 5,163,564 $ 2,096,372 $- 1,133,694
Plant and Equipment $ 19,030,000 $ 18,000 $ 20,735,200 $ 16,200,000 $ 18,700,000 $ 21,180,000
Total Assets $ 25,100,628 $ 13,998,007 $ 24,547,638 $ 27,236,686 $ 27,381,575 $ 30,618,342
Plant Utilization 175.85% 0.10% 161.00% 166.32% 179.57% 161.00%
Low End Tech Segment Share 18.88% 1.21% 19.89% 20.38% 22.31% 17.34%
High End Tech Segment Share 24.14% 1.18% 16.80% 17.58% 18.02% 22.29%
Overall Market Share 20.54% 1.20% 18.91% 19.49% 20.95% 18.91%
Complement 273 0 250 258 279 250
Overtime 0.05% -100.00% 0.00% 0.17% 0.00% 0.00%
Turnover Rate 10.01% 0.00% 10.00% 10.02% 10.00% 10.00%
Productivity Index 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Attachments

Solution Summary

Solution explains Economic Value-Added (EVA), Market Value-Added (MVA)

$2.19