Answer the Following Questions Using the Information Below:
Waldorf Company

question 51

Multiple Choice

Answer the following questions using the information below:
Waldorf Company has two sources of funds: long-term debt with a market and book value of $5 million issued at an interest rate of 12%, and equity capital that has a market value of $4 million (book value of $2 million) . Waldorf Company has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 12%, while the tax rate is 25%.
$$\begin{array} { | l | r | r | r | } \hline & \text { Operating Income } & \text { Assets } & \text { Current Liabilities } \\\hline \text { St. Louis } & \$ 480,000 & \$ 2,000,000 & \$ 100,000 \\\hline \text { Cedar Rapids } & \$ 600,000 & \$ 4,000,000 & \$ 300,000 \\\hline \text { Wichita } & \$ 1,020,000 & \$ 6,000,000 & \$ 600,000 \\\hline\end{array}$$
-What is the EVA for Wichita?

• A) $225,000
• B) $765,000
• C) $207,180
• D) $557,820

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Definitions:

Performance Impossible

A legal concept where the fulfillment of contractual obligations becomes impossible due to unforeseeable circumstances.

Running Errands

Performing minor tasks or acquiring items outside of the home, often involving travel from one place to another.

Labouring Job

A labouring job involves physical work, often in sectors such as construction, manufacturing, or agriculture, typically requiring physical strength and endurance more than formal education.

Invalid Tender

An offer to pay that does not meet the legal requirements.