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HHH Inc. reported $11,750 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 25%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year? Select the correct answer.   a. $1,762.50     b. $1,735.30     c. $1,721.70     d. $1,748.90     e. $1,776.10

HHH Inc. reported $11,750 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 25%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year? Select the correct answer.   a. $1,762.50     b. $1,735.30     c. $1,721.70     d. $1,748.90     e. $1,776.10

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter5: The Income Statement And The Statement Of Cash Flows
Section: Chapter Questions
Problem 1RE: Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of...
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HHH Inc. reported $11,750 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 25%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year?

Select the correct answer.

  a. $1,762.50  
  b. $1,735.30  
  c. $1,721.70  
  d. $1,748.90  
  e. $1,776.10
Expert Solution
Step 1

EVA means economic value added by business over the period. This is calculated by deducting weighted average capital cost from net operating profits after taxes. 

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