Question
Asked Dec 13, 2019
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  • A firm has a positive economic value added (EVA) of $500 (all amounts in thousands), long-term debt of $20,000, equity of $40,000, a weighted average cost of capital (WACC) of 9% and a marginal tax rate of 32%. What is this organization's earnings before interest and taxes (EBIT)?

 

  1. $4,012
  2. $5,900
  3. $8,676

$18,438

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Expert Answer

Step 1

Economic value added is computed by subtracting the weighted interest expenses from the Net Operating profits after tax. Interest expenses net of taxes are added back to the ...

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