Springfield Corporation,whose Tax Rate Is 30%,has Two Sources of Funds

question 32

Multiple Choice

Springfield Corporation,whose tax rate is 30%,has two sources of funds: long-term debt with a market value of $8,400,000 and an interest rate of 8%,and equity capital with a market value of $14,000,000 and a cost of equity of 13%.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 (EVA^®) for the Blue Division? (Round intermediary calculations to four decimal places. )

• A)-$86,580
• B)$86,580
• C)$404,280
• D)-$230,550

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Definitions:

Nirvana

In Buddhism, a transcendent state free from suffering and the cycle of rebirth and death, representing the ultimate spiritual goal.

Karma Yoga

A spiritual path in Hinduism emphasizing selfless action performed for the benefit of others as a way to spiritual liberation.

Detachment

Lack of willfulness or emotional concern. Detachment through ascetic denial (or, failing that, aesthetic contemplation) was proposed by the great pessimist Arthur Schopenhauer as a method of responding to the fact that life is filled with frustration due to our incessant irrational desires. Schopenhauer’s answer is similar to that of the ancient philosophy called Stoicism, which also teaches that most of our passions are irrational and are best ignored through the detachment and commitment to reason.

Golden Rule

A moral principle that suggests treating others as one would like to be treated themselves.