Calculate EVA for the Gold Division
Stonex Corp, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $6,000,000 and an interest rate of 8%, and equity capital with a market value of $14,000,000 and a cost of equity of 12%. Stonex has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year:
Total Assets Current Liabilities Operating Income
Blue Div. $9,500,000 $2,500,000 $1,155,000
Gold Div. $10,000,000 $2,400,000 $1,200,000
A) ($57,640)
B) ($27,840)
C) ($37,340)
D) $397,440
Answer: B
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