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Zergnet Zergnet
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7 months ago
People's Construction Company has set a 15% required minimum rate of return. The company's CFO is considering investing in a $125,000 crane that is expected to generate $25,000 of additional operating income. People's weighted-average cost of capital is 10% and its tax rate is 30%. What is the crane's EVA?

▸ $5,000

▸ $17,500

▸ $100,000

▸ $12,500
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Managerial Accounting

Managerial Accounting


Edition: 4th
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awbradshawawbradshaw
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7 months ago
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$5,000

EVA = Net operating profit - (invested capital × weighted average cost of capital) = ($25,000 × 70%) - ($125,000 × 10%) = $17,500 - $12,500 = $5,000
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Zergnet Author
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7 months ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
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This helped my grade so much Perfect
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Correct Slight Smile TY
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