Author Question: Springfield Corporation, whose tax rate is 30%, has two sources of funds: long-term debt with a ... (Read 150 times)

cabate · **on:** Mar 6, 2021

Question 1

Return on investment can be increased by ________.
◦ increasing current assets
◦ increasing return on sales
◦ decreasing revenues
◦ increasing the debt portion of the capital

Question 2

Springfield Corporation, whose tax rate is 30%, has two sources of funds: long-term debt with a market value of $8,400,000 and an interest rate of 8%, and equity capital with a market value of $14,000,000 and a cost of equity of 13%. Springfield has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year:

	Total Assets	Current Liabilities	Operating Income
Blue Div.	$9,500,000	$3,100,000	$1,059,000
Gold Div.	$11,000,000	$2,200,000	$1,200,000

What is Economic Value Added (EVA®) for the Blue Division? (Round intermediary calculations to four decimal places.)
◦ -$86,580
◦ $86,580
◦ $404,280
◦ -$230,550

miss.ashley · **Reply #1 on:** Mar 6, 2021

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