Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 15

EVA ® NOPAT and EVA ® Capital: Financing Approach Refer to the preceding problem for reported financial statement data for Astro, Inc.
Required
1. Prepare, using the financing approach, an estimate of EVA ® NOPAT. In addition to the above data, you've discovered the following: increase during the year of the LIFO reserve, $2; imputed interest expense on noncapitalized leases, $4; and increase in deferred tax liability during the year, $5. ( Hint: The correct answer is $53.) What is the rationale for the various adjustments you made to the company's reported income statement
2. Prepare, using the financing approach, an estimate of EVA ® capital. ( Hint: The correct answer is $925.) In addition to the above information, you note the following: end-of-year value of the LIFO reserve, $10; and present value of noncapitalized leases, $50. What is the rationale for the adjustments you made to reported balance sheet amounts in order to estimate EVA ® capital
3. Given the company's WACC, what is the estimated EVA ® for the year How do you interpret this figure