Springfield Corporation, Whose Tax Rate Is 30%, Has Two Sources

question 149

Multiple Choice

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:

What is Economic Value Added (EVA®) for the Blue Division? (Round intermediary calculations to four decimal places.)

• A) -$86,580
• B) $86,580
• C) $404,280
• D) -$230,550

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