Answer the Following Question(s)using the Information Below

question 53

Multiple Choice

Answer the following question(s) using the information below:
Springfield Corporation,whose tax rate is 40%,has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%,and equity capital with a market value of $12,000,000 and a cost of equity of 12%.Springfield has two operating divisions,the Blue division and the Gold division,with the following financial measures for the current year:

-What is Economic Value Added () for the Blue Division?

• A)-$233,400
• B)$21,960
• C)$188,600
• D)$433,960
• E)-$63,800

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Definitions:

Variable Overhead Costs

Costs that fluctuate with changes in production volume or activity levels, such as utilities or raw materials, contrasting with fixed costs.

Fixed Overhead Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Standard Costs

Predetermined costs for products and services, used as a benchmark to measure actual operational performance.

Produced

The quantity of goods or services created by a business or production process within a certain period.