Stonex Corp,whose Tax Rate Is 40%,has Two Sources of Funds

Multiple Choice

Stonex Corp,whose tax rate is 40%,has two sources of funds: long-term debt with a market value of $6,000,000 and an interest rate of 8%,and equity capital with a market value of $14,000,000 and a cost of equity of 12%.Stonex has two operating divisions,the Blue division and the Gold division,with the following financial measures for the current year: $$\begin{array} { | l | l | l | l | } \hline & \text { Total Assets } & \text { Current Liabilities } & \text { Operating Income } \\\hline \text { Blue Div. } & \$ 9,500,000 & \$ 2,500,000 & \$ 1,155,000 \\\hline \text { Gold Div. } & \$ 10,000,000 & \$ 2,400,000 & \$ 1,200,000 \\\hline\end{array}$$ Calculate EVA for the Gold Division.

A) ($57,640)
B) ($27,840)
C) ($37,340)
D) $397,440