Answer the Following Questions Using the Information Below:
Coldbrook Company

question 38

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 Brooksville?

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

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Definitions:

Total Assets

The sum of all assets owned by an entity, including both current and long-term assets, representing the total value of what the entity owns.

Profitability

The ability of a firm to earn income.

Days' Sales

A financial metric that compares a company's average receivables to its average daily sales, indicating how fast the company collects payments from customers.

Inventory

The total quantity of goods and materials a business holds for the purpose of resale or production.