Answer the Following Questions Using the Information Below:
Coldbrook Company

question 114

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 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%.
$$\begin{array} { | l | r | r | r | } \hline & \text { Operating Profit } & { \text { Assets } } & \text { Current Liabilities } \\\hline \text { Darwin } & \$ 815000 & \$ 3750000 & \$ 800000 \\\hline \text { Hobart } & \$ 1100000 & \$ 5000000 & \$ 1200000 \\\hline \text { Newcastle } & \$ 2450000 & \$ 9250000 & \$ 3180000 \\\hline\end{array}$$
-What is the EVA for Hobart?

• A)$428 000
• B)$476 250
• C)$415 525
• D)$390 000

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Definitions:

Equilibrium Quantity

At the market equilibrium price, the amount of goods or services offered matches the amount requested.

Supply Falls

A condition in which the quantity of a product or service available in the market decreases, potentially leading to higher prices.

Surplus

The condition that occurs when supply exceeds demand, often resulting in a decrease in prices.

Shortage

A situation where the demand for a good or service exceeds its supply in a market.