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Answer :
Answer: the economic value added for Acme and Apex are $27,000 and $107,500 respectively. The economic value added per dollar of invested capital for Acme and Apex are 0.54 and 0.86 respectively.
Explanation:
a-1. Economic value added (EVA) is the amount of money that a company generates for shareholders after subtracting the cost of capital. It is determined by subtracting a firm's cost of capital from its net operating profit after taxes (NOPAT). The formula for calculating EVA is as follows: EVA = NOPAT - (WACC × Capital)
Acme NOPAT = $62,000 - $30,000 = $32,000
EVA = $32,000 - ($50,000 × 0.10) = $27,000
Apex NOPAT = $190,000 - $65,000 = $125,000
EVA = $125,000 - ($125,000 × 0.14) = $107,500
b-1. Economic value added per dollar of invested capital is another useful metric for evaluating a company's financial performance. It can be calculated as follows: EVA/Invested Capital
Acme EVA = $27,000
Invested Capital = $50,000
EVA/Invested Capital = $27,000/$50,000 = 0.54
Apex EVA = $107,500
Invested Capital = $125,000
EVA/Invested Capital = $107,500/$125,000 = 0.86
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