Question: For 2005, Bargain Basement Stores reported $11,500 of sales and $5,000 of operating costs (including depreciation). The company has $20,500 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 10%, and the federal-plus-state income tax rate was 40%. What was the firm's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during 2005?  Edit

Answer:
Net sales = 11500.00
operating cost = - 5000.00
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Income before tax = 6500 . 00
Income tax (40%) = -2600. 00
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Net profit after tax = 3,900 . 00

capital = $20,500.00

Economic Value Added (EVA) = 3900.00 - (20500.00*0.10)
= $1850.00 (Ans.)
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