The following data pertains to XYZ Inc. engaged in software consultancy business as on 31 December 2024. ($ Million) Income from consultancy 935.00…
CA Final · Advanced Financial Management · RTP · May 2026
The following data pertains to XYZ Inc. engaged in software consultancy business as on 31 December 2024. ($ Million) Income from consultancy 935.00 EBIT 180.00 Less: Interest on Loan 18.00 EBT 162.00 Tax @ 35% 56.70 105.30 Balance Sheet Liabilities Amount Assets Amount Equity Stock (10 million share @ $ 10 each) 100 Land and Building 200 Reserves & Surplus 325 Computers & Softwares 295 Loans 180 Current Assets: Current Liabilities 180 Debtors 150 Bank 100 Cash 40 785 290 785 With the above information and following assumption you are required to compute (a) Economic Value Added (EVA)
Suggested Answer and Working Notes:
Determination of Economic Value Added (EVA) $ Million EBIT 180.00 Less: Taxes @ 35% 63.00 Net Operating Profit after Tax 117.00 Less: Cost of Capital Employed [W. No.1] 72.60 Economic Value Added 44.40 Working Notes: (1) Total Capital Employed Equity Stock $ 100 Million Reserve and Surplus $ 325 Million Loan $ 180 Million $ 605 Million WACC 12% Cost of Capital employed $ 605 Million x 12% $ 72.60 Million
Topics: Business Valuation
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