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Author Question: Coptermagic Company supplies helicopters to corporate clients. Coptermagic has two sources of funds: ... (Read 84 times)

mmm

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on: Mar 6, 2021
Coptermagic Company supplies helicopters to corporate clients. Coptermagic has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million (book value of $8 million). The cost of equity capital for Coptermagic is 15%, and its tax rate is 30%. Coptermagic has profit centers in four divisions that operate autonomously. The company's results for 2015 are as follows:

​Operating IncomeAssetsCurrent Liabilities
New York$1,750,000$11,500,000$2,500,000
Chicago2,400,0009,000,0003,500,000
Dallas4,675,00027,500,000 9,500,000
Los Angeles4,200,00025,000,0008,000,000
Required:
a.Compute Coptermagic's weighted average cost of capital.
b.Compute each division's Economic Value Added.
c.Rank the divisions by EVA.
Horngren's Cost Accounting: A Managerial Emphasis ¦ Datar, Rajan ¦ 16th Edition
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Marked as best answer by mmm on Mar 6, 2021

Joy Chen

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Reply #1 on: Mar 6, 2021
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mmm

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Reply 2 on: Mar 6, 2021
Wow, this really help

strudel15

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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