ECONOMIC VALUE ADDED
Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results:
|
|
Adams Division
|
Jefferson Division
|
|
Net (after-tax) income
|
$ 605,000
|
$ 315,000
|
|
Average operating assets
|
4,000,000
|
3,250,000
|
Washington's actual cost of capital was 12 percent.
Required:
1. Calculate the EVA for the Adams Division.
2. Calculate the EVA for the Jefferson Division.
3. Is each division creating or destroying wealth?