Answer the Following Questions Using the Information Below:
Coldbrook Company

question 67

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 centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 15%, while the tax rate is 30%.
$$\begin{array} { | l | r | r | r | } \hline & \text { Operating Income } & \text { Assets } & \text { Current Liabilities } \\\hline \text { Bish Bash Falls } & \$ 815,000 & \$ 3,750,000 & \$ 800,000 \\\hline \text { Brooksville } & \$ 1,100,000 & \$ 5,000,000 & \$ 1,200,000 \\\hline \text { Stonybrook } & \$ 2,450,000 & \$ 9,250,000 & \$ 3,180,000 \\\hline\end{array}$$
-What is the EVA for Bish Bash Falls?

• A) $338,563
• B) $305,000
• C) $275,500
• D) $255,500

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Definitions:

Below-Market Price

A price for goods or services that is lower than the current market rate or the value typically expected for similar items under normal market conditions.

Duress

A condition where an individual is forced or coerced into acting against their will or making decisions under pressure or threat.

Investment Firm

A business or financial institution that invests the pooled capital of investors in financial securities, typically offering a range of investment products and services.

Commission

A group designated to perform a specific function or investigation, or a fee paid to an agent for services rendered.