Answer the Following Questions Using the Information Below:
Coldbrook Company

question 141

Multiple Choice

Answer the following questions using the information below:
Coldbrook Company has two sources of funds: long-term debt with a market and book value of $15 million issued at an interest rate of 10%, and equity capital that has a market value of $9 million (book value of $5 million) . Coldbrook Company has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 15%, while the tax rate is 30%.
$$\begin{array} { | l | r | r | r | } \hline & \text { Operating Income } & \text { Assets } & \text { Current Liabilities } \\\hline \text { Bish Bash Falls } & \$ 815,000 & \$ 3,750,000 & \$ 800,000 \\\hline \text { Brooksville } & \$ 1,100,000 & \$ 5,000,000 & \$ 1,200,000 \\\hline \text { Stonybrook } & \$ 2,450,000 & \$ 9,250,000 & \$ 3,180,000 \\\hline\end{array}$$
-What is the EVA for Stonybrook?

• A) $1,108,000
• B) $1,168,700
• C) $1,315,063
• D) $1,403,063

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Definitions:

Statute of Frauds

A legal principle that requires certain contracts to be in writing and signed by the party to be charged, to be enforceable.

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a legal principle that requires certain types of contracts to be executed in writing and signed by the party to be charged, for the purpose of preventing fraud.

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Legal rights or claims to the use, ownership, or possession of real estate or property.