BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

Solutions

Chapter
Section
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
13 views

Use the following information for Brief Exercises 11-19 through 11-21:

Barnard Manufacturing earned operating income last year as shown in the following income statement:

Chapter 11, Problem 21BEB, Use the following information for Brief Exercises 11-19 through 11-21: Barnard Manufacturing earned

At the beginning of the year, the value of operating assets was $2,700,000. At the end of the year, the value of operating assets was $2,300,000.

Brief Exercise 11-21 Calculating Economic Value Added

Refer to the information for Barnard Manufacturing on the previous page. Total capital employed equaled $1,400,000. Barnard’s actual cost of capital is 12%.

Required:

Calculate the EVA for Barnard Manufacturing.

To determine

Compute EVA for B Manufacturing.

Explanation

Economic Value Added (EVA):

Economic value added can be computed by deducting the dollar amount of capital employed from the operating income after tax. The dollar amount of capital employed can be calculated by multiplying the capital employed by the percentage of the cost of capital.

Use the following formula to calculate the economic value added:

EVA=After tax operating income(Total capital employed×Actual percentage of cost of capital)

Substitute $480,000 for after-tax operating income, $1,400,000 for total capital employed and 12% for the actual percentage of the cost of capital in the above formula

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Give an example of a price ceiling and an example of a price floor.

Principles of Economics (MindTap Course List)

Suppose a firm estimates its WACC to be 10%. Should the WACC be used to evaluate all of its potential projects,...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)