Assume Division 1 of the XYZ Company Had the Following

question 8

Multiple Choice

Assume Division 1 of the XYZ Company had the following results last year.
$\begin{array}{|l|r|}\hline\text { Sales } & \$ 5,000,000 \\\hline\text { Operating income } & 1,000,000 \\\hline \text { Total assets (average) } & 10,000,000 \\\hline \text { Current liabilities } & 500,000\\\hline\end{array}$
Management's required rate of return is 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%.
- What is the division's economic value added?

• A) $60,000
• B) $130,000
• C) $270,000
• D) $430,000

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Definitions:

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