Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 41

EVA NOPAT and EVA Capital: Financing Approach Refer to Problem 19-44 for reported financial statement data for Nimrod, Inc.
Required
1. Prepare, using the financing approach, an estimate of EVA NOPAT. In addition to the above data, you discover 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