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If you have net operating profit after tax of $100,000, capital employed of $500,000 and WACC of 10%, your economic value added is _______________560004500010000050000

Question

If you have net operating profit after tax of 100,000,capitalemployedof100,000, capital employed of 500,000 and WACC of 10%, your economic value added is _______________560004500010000050000

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Solution

The Economic Value Added (EVA) is calculated using the formula:

EVA = Net Operating Profit After Tax (NOPAT) - (Weighted Average Cost of Capital (WACC) * Capital Employed)

Given that NOPAT = 100,000,CapitalEmployed=100,000, Capital Employed = 500,000, and WACC = 10% (or 0.10 when expressed as a decimal), we can substitute these values into the formula:

EVA = 100,000(0.10100,000 - (0.10 * 500,000) EVA = 100,000100,000 - 50,000 EVA = $50,000

So, the Economic Value Added is $50,000.

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