Answer the Following Questions Using the Information Below:
Echidna Company

question 102

Multiple Choice

Answer the following questions using the information below:
Echidna Company has two sources of funds: long-term debt with a market and book value of $30 million issued at an interest rate of 10%,and equity capital that has a market value of $18 million (book value of $5 million) .Echidna Company has profit centres in the following locations with the following operating profits,total assets,and current liabilities.The cost of equity capital is 15%,while the tax rate is 30%.
$$\begin{array} { | l | r | r | r | } \hline & \text { Operating Profit } & { \text { Assets } } & \text { Current Liabilities } \\\hline \text { Mt Iron } & \$ 1630000 & \$ 5625000 & \$ 1600000 \\\hline \text { Mt Pilbara } & \$ 2200000 & \$ 7500000 & \$ 2400000 \\\hline \text { Broken Hill } & \$ 4900000 & \$ 13875000 & \$ 6360000 \\\hline\end{array}$$
-What is the EVA for Mt Pilbara?

• A)$952 500
• B)$831 050
• C)$856 000
• D)$1 030 000

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Definitions:

Mathematical Procedures

Systematic operations or processes in mathematics that involve calculation, reasoning, and problem-solving.

Level of Significance

A statistical threshold used to determine if a result can be considered statistically significant, often denoted by alpha (α).

Statistical Risk

Statistical risk quantifies the likelihood of a negative event occurring. It is often used in the context of financial markets, health studies, and other areas requiring risk assessment based on numerical data.

Variability

The extent to which data points in a statistical distribution or dataset differ from each other and from their mean.