Springfield Corporation, Whose Tax Rate Is 40%, Has Two Sources

Multiple Choice

Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. 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?

A) -$233,400
B) $21,960
C) $188,600
D) $433,960