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Oscar Lewitt, CEO of Ingram Carparation, had just read in a recent issue of Fortone magazine an aticle entitled "America's Wealth Creators" and noticed several names of corporations be was familiar with, such as Microsoft, General Electric, Intel, Walmart, Coca- Cola, Merck, znd Pfizar. These top wealth creators were listed in terms of their market value added (MVA) and economic value added (EVA). Although he knew that some of the MVA and EVA were in the billions of dollars, he noticed in the article two other mmbars, return on capital and cost of capital. He falt that if these corporations, despite thair size, were able to figure out how much vahne they ware adding to the wealth of their shareholders, it would be possible to calculate the EVA for Ingram Corporation. At his next management committee meeting, Mr. Lewitt asked his controller to calculate the EVA for Ingram Corparation and to report the information to the management committee at their next meeting for discussion purposes. After some research about this new financial technique, the controller knew that he had to refer to his financial statements to calculate the EVA. He had to draw several numbers from the statement of income and the statement of financial position to determine the cost of capital and ROA. The company's most recent statement of income and different sources of financing are shown below: Ingram Corporation Statement of Income For the year ended December 31, 2014

Oscar Lewitt, CEO of Ingram Carparation, had just read in a recent issue of Fortone magazine an aticle entitled "America's Wealth Creators" and noticed several names of corporations be was familiar with, such as Microsoft, General Electric, Intel, Walmart, Coca- Cola, Merck, znd Pfizar. These top wealth creators were listed in terms of their market value added (MVA) and economic value added (EVA). Although he knew that some of the MVA and EVA were in the billions of dollars, he noticed in the article two other mmbars, return on capital and cost of capital. He falt that if these corporations, despite thair size, were able to figure out how much vahne they ware adding to the wealth of their shareholders, it would be possible to calculate the EVA for Ingram Corporation. At his next management committee meeting, Mr. Lewitt asked his controller to calculate the EVA for Ingram Corparation and to report the information to the management committee at their next meeting for discussion purposes. After some research about this new financial technique, the controller knew that he had to refer to his financial statements to calculate the EVA. He had to draw several numbers from the statement of income and the statement of financial position to determine the cost of capital and ROA. The company's most recent statement of income and different sources of financing are shown below: Ingram Corporation Statement of Income For the year ended December 31, 2014

Essentials of Business Analytics (MindTap Course List)
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter2: Descriptive Statistics
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Problem 25P: The scatter chart in the following figure was created using sample data for profits and market...
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Oscar Lewitt, CEO af Ingram Corporation, had just read in a recent issue of Fortone magazine an aticle entitled "America's Wealth Creators" and noticed several names of corporations be was faniliar with, such as Nicrosoft, Ganeral Electric, Intal Walmart, Coca- Cola, Marckt nd Pfizar, These top wealth aeators were listed in tems of their market vaue added (MVA) and economic value added (EVA). Although be knew that some of the MVA and EVA were in the bilhons of dollars, he noticed in the article two other mumbers, return on capital and cost of capital He falt that if these corporations, despite their siza, Wera able to figure out bow much valne they ware adding to the wealth of thair shareholders, it would be possible to calculats the EVA for Ingram Corporation. At his next management committee meeting, Mr. Lewitt asked his controllar to calculate the EVA for Ingram Corporation and to report the information to the management committee at their naxt meating for discusBsion purposes. After some research about this new financial technique, the controller knew that he had to refer to his financial statements to calculate the EVA. Ha had to draw several numbers from the statement of income and the statement of financial position to determine the cost of capital and ROA. The company's most receat statemeat of income and differant sources of financing are shown below. Ingram Corporstion Statement of Income For the year ended December 31, 2014 Revegue $1.200,000 Cost of sales (650.000) 550,000 Grass profit Experses Distribution costs (150,000) Administrative expanses (125,000) Depreciation (50,000) Finance costE (45.000) Total expenses 370.000) Profit before txges Income tax expense (67.500) Proft for the year $ 112.500 The company's three major sources of financing are from short-tarm landers for $100,000, a mortgage for $325,000, and equity for 5430,000. The equity portion was split between share capital of 5130,000 and retained earnings of $300,000. The cost of capital for these three sources offnancimg is as follows: Equity Short-term borrowings Long-term borrowings Questions 1. Calculate Ingram Corporation's EVA. 2. Comment on the EVA. How could EVA be improved? Act Go
Transcribed Image Text:Oscar Lewitt, CEO af Ingram Corporation, had just read in a recent issue of Fortone magazine an aticle entitled "America's Wealth Creators" and noticed several names of corporations be was faniliar with, such as Nicrosoft, Ganeral Electric, Intal Walmart, Coca- Cola, Marckt nd Pfizar, These top wealth aeators were listed in tems of their market vaue added (MVA) and economic value added (EVA). Although be knew that some of the MVA and EVA were in the bilhons of dollars, he noticed in the article two other mumbers, return on capital and cost of capital He falt that if these corporations, despite their siza, Wera able to figure out bow much valne they ware adding to the wealth of thair shareholders, it would be possible to calculats the EVA for Ingram Corporation. At his next management committee meeting, Mr. Lewitt asked his controllar to calculate the EVA for Ingram Corporation and to report the information to the management committee at their naxt meating for discusBsion purposes. After some research about this new financial technique, the controller knew that he had to refer to his financial statements to calculate the EVA. Ha had to draw several numbers from the statement of income and the statement of financial position to determine the cost of capital and ROA. The company's most receat statemeat of income and differant sources of financing are shown below. Ingram Corporstion Statement of Income For the year ended December 31, 2014 Revegue $1.200,000 Cost of sales (650.000) 550,000 Grass profit Experses Distribution costs (150,000) Administrative expanses (125,000) Depreciation (50,000) Finance costE (45.000) Total expenses 370.000) Profit before txges Income tax expense (67.500) Proft for the year $ 112.500 The company's three major sources of financing are from short-tarm landers for $100,000, a mortgage for $325,000, and equity for 5430,000. The equity portion was split between share capital of 5130,000 and retained earnings of $300,000. The cost of capital for these three sources offnancimg is as follows: Equity Short-term borrowings Long-term borrowings Questions 1. Calculate Ingram Corporation's EVA. 2. Comment on the EVA. How could EVA be improved? Act Go
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