FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Jikoni Company has 2 sources of funds: long-
term debt with a market and book value of
$15M issued at an interest rate of 10%, and
equity capital that has a market value of $9
million (book value of $5 million). Jikoni
Company has profit centres in the following
locations with the following operating
incomes, total assets, and current liabilities.
The cost of equity capital is 15%, while the tax
rate is 30%.
Operating Assets
Income
Current
Liabilities
Smith Falls $815,000 $3,750,000 $800,000
Brocksville $1,100,000 $5,000,000$1,200,000
Stoneybrook$2,450,000$9,250,000 $3,180,000
What is the EVA for Smith Falls?
A)$305,000
B)$338,563
C)$220,188
D)$275,500
E)$255,500
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Transcribed Image Text:Jikoni Company has 2 sources of funds: long- term debt with a market and book value of $15M issued at an interest rate of 10%, and equity capital that has a market value of $9 million (book value of $5 million). Jikoni Company has profit centres in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 15%, while the tax rate is 30%. Operating Assets Income Current Liabilities Smith Falls $815,000 $3,750,000 $800,000 Brocksville $1,100,000 $5,000,000$1,200,000 Stoneybrook$2,450,000$9,250,000 $3,180,000 What is the EVA for Smith Falls? A)$305,000 B)$338,563 C)$220,188 D)$275,500 E)$255,500
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