university of phoenix week 4 corporate finance practice question

Here are simplified financial statements for Watervan Corporation:

INCOME STATEMENT
(Figures in $ millions)
Net sales$882.00
Cost of goods sold 742.00
Depreciation 32.00
Earnings before interest and taxes (EBIT)$108.00
Interest expense 13.00
Income before tax$95.00
Taxes 19.95
Net income$75.05
BALANCE SHEET
(Figures in $ millions)
 End of Year Start of Year
Assets       
Current assets$370  $314 
Long-term assets 260   223 
Total assets$630  $537 
Liabilities and shareholders’ equity       
Current liabilities$195  $158 
Long-term debt 109   122 
Shareholders’ equity 326   257 
Total liabilities and shareholders’ equity$630  $537 

The company’s cost of capital is 8.5%.

a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

d. Is the company creating value for its shareholders?

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