Answer the Following Questions Using the Information Below:
Echidna Company

question 115

True/False

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%.
$$\begin{array} { | l | r | r | r | } \hline & \text { Operating Profit } & { \text { Assets } } & \text { Current Liabilities } \\\hline \text { Mt Iron } & \$ 1630000 & \$ 5625000 & \$ 1600000 \\\hline \text { Mt Pilbara } & \$ 2200000 & \$ 7500000 & \$ 2400000 \\\hline \text { Broken Hill } & \$ 4900000 & \$ 13875000 & \$ 6360000 \\\hline\end{array}$$
-Economic Value Added (EVA)calculations are similar to residual income calculations because in each calculation there is a charge for the division's invested capital which is deducted from a measure of that division's profit.

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Definitions:

Shipping Company

A business that provides services for transporting goods by sea, air, or land, from one location to another.

Flow Management

The process of overseeing and regulating the movement of goods, services, and information through the supply chain.

Pricing Department

A division within a company responsible for setting prices for products or services based on market research, cost analysis, and competitive strategies.

Engineering Department

A division within a company responsible for developing, implementing, and maintaining engineering projects and processes.