Economic Value Added (EVA) for a firm
Question
I am trying to find the Economic Value Added (EVA) for a firm. The equation that I have is “EVA = Operating Income
– (Cost of Capital x Total Capitalization)”. The problem that I am having is with the Operating Income. “Operating Income = Net Income + After-tax Interest. I cannot figure out how to get the After-Tax Interest. The problem that I am trying to solve is as follows.
| At the end of 2011 Home Depot’s total capitalization amounted to $29,007 million. In 2012 debt investors received interest income of $640 million. Net income to shareholders was $4,511 million. (Assume a tax rate of 35%.) |
| Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |