Here are simplified financial statements for Watervan Corporation:INCOME STATEMENT(Figures in $ millions)Net sales$ 887.00Cost of goods sold747.00Depreciation37.00Earnings before interest and taxes (EBIT)$ 103.00Interest expense18.00Income before tax$ 85.00Taxes17.85Net income$ 67.15BALANCE SHEET(Figures in $ millions) End of YearStart of YearAssets Current assets$ 375$ 324Long-term assets270228Total assets$ 645$ 552Liabilities and shareholders’ equity Current liabilities$ 200$ 163Long-term debt114127Shareholders’ equity331262Total liabilities and shareholders’ equity$ 645$ 552The company’s cost of capital is 8.5%.Required:Calculate Watervan’s economic value added (EVA).Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.What is the company’s return on capital? (Use start-of-year rather than average capital.)Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.What is its return on equity? (Use start-of-year rather than average equity.)Note: Enter your answer as a percent rounded to 2 decimal places.Is the company creating value for its shareholders?

Economic value added (EVA) is calculated as shown below. Economic added value=NOPAT-Invested…

Answered: OME STATEMENT (Figures in $ millions)…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 19BEA

See similar textbooks

INCOME STATEMENT
(Figures in $ millions)
Net sales	$ 887.00
Cost of goods sold	747.00
Depreciation	37.00
Earnings before interest and taxes (EBIT)	$ 103.00
Interest expense	18.00
Income before tax	$ 85.00
Taxes	17.85
Net income	$ 67.15

BALANCE SHEET
(Figures in $ millions)
	End of Year	Start of Year
Assets
Current assets	$ 375	$ 324
Long-term assets	270	228
Total assets	$ 645	$ 552
Liabilities and shareholders’ equity
Current liabilities	$ 200	$ 163
Long-term debt	114	127
Shareholders’ equity	331	262
Total liabilities and shareholders’ equity	$ 645	$ 552

Required:

Calculate Watervan’s economic value added (EVA).

Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
What is the company’s return on capital? (Use start-of-year rather than average capital.)

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
What is its return on equity? (Use start-of-year rather than average equity.)

Note: Enter your answer as a percent rounded to 2 decimal places.
Is the company creating value for its shareholders?

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

OME STATEMENT (Figures in $ millions) Net sales $ 887.00 Cost of goods sold 747.00 Depreciation 37.00 Earnings before interest and taxes (EBIT) $ 103.00 Interest expense 18.00 Income before tax $ 85.00 Taxes 17.85 Net income $ 67.15

Required: