Stonex Corp, Whose Tax Rate Is 35%, Has Two Sources

Multiple Choice

Stonex Corp, whose tax rate is 35%, has two sources of funds: long-term debt with a market value of $6,200,000 and an interest rate of 9%, and equity capital with a market value of $14,000,000 and a cost of equity of 13%. Stonex has two operating divisions, the Blue division and the Gold division, with the following financial measures for the current year:

Calculate EVA for the Gold Division. (Round intermediary calculations to four decimal places.)

A) -$56,290
B) $56,290
C) $1,040,000
D) $983,710