Page 67 - DMGT405_FINANCIAL%20MANAGEMENT

Unit 4: Concept of Economic Value Added

Other Operating Expenses 100.00 Notes

Operating income 550.00
Interest Expenses –200.00
Income Before Tax 350.00

Income Tax (25%) 140.00
Net Profit After Taxes 210.00
Common Balance Sheet
Current Assets Current Liabilities
Cash 50.00 Accounts Payable (A\P) 100.00
Receivable (A/R) 370.00 Accrued Expenses (A\E) 250.00
Inventory 235.00 Short-Term Debt 300.00
Other Current Assets 145.00 Total Current Liabilities 650.00
Total Current Assets 800.00 Long-Term Liabilities
Fixed Assets Long-Term Debt 760.00
Property, Land 650.00 Total Long-Term Liabilities 760.00
Equipment 410.00 Capital (Common Equity)
Other Long-Term Assets 490.00 Capital Stock 300.00
Total Fixed Assets 1,550.00 Retained Earnings 430.00
Year to Date Profit/Loss 210.00
Total Equity Capital 940.00
Total Assets 2,350.00 Total Liabilities 2,350.00

1. Calculate Net Operating Profit After Tax (NOPAT)
2. Identify company’s Capital (C)
3. Determine a reasonable Capital Cost Rate(CCR)

4. Calculate company’s Economic Value Added (EVA)
Solution:
Step 1: Calculate Net Operating Profit After
Taxes (NOPAT)

Net Sales 2,600
(A) Cost of Goods Sold 1,400.00
SG&A Expenses 400.00
Depreciation 150.00

Other Operating Expenses 100.00 2050
Operating income 550.00
Tax (25%) 140.00
NOPAT 410.00

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