Bonds 9,000

Interest rate 7.00%

Sales 18,000
Operating costs excluding depreciation 8,250
Depreciation 1,750
Operating income (EBIT) 8,000
Interest on loan 630
Earnings before tax (EBT) 7,370
Bonds 16,500
Interest rate 7.25%
Sales 125,000
Operating costs excluding depreciation 75,500
Depreciation 10,200 .
Income tax rate 35%
Earnings before interest and tax 39,300
Interest expense 1196.25
Earnings before tax 38103.75
Tax (35%) 13336.313
Earning after tax or net income 24767.438
Bonds 35,250
Interest rate 6.75%
Sales 222,500
Operating costs excluding depreciation 140,500
Depreciation 9,250
Income tax rate 35%
Capital expenditure(amount invested in fixed asset) 15,250
Investment made in net working capital 6,850
Earnings before interest and tax (EBIT) 72,750
EBAT 47287.5
Free cash flow 34437.5
No. Of shares of common stock 2,000,000
Price/unit 17
Book fee of equity 40,000,000
Market cost of fairness 34000000
Market value added(MVA) -6,000,000
Net income 750,000
Tax rate 40%
Interest expense 200,000
Total invested capital employed 9,000,000
After-tax cost of capital 10%
EBIT 1,450,000
NOPAT=EBIT(1-TAX) 870000
EVA= NOPAT-Cost of Capital* Capital Employment -30000
x=EBIT
EBIT-Interest-Tax=Net income
(x – $200.000) - 0.40*(x – $200.000) = $750.000
x - $200.000 = $750.000/0.60
x = $1.450.000
 Bonds 3,200 (millions)
Interest rate 5%
Sales 8,250 (millions)
Operating costs excluding depreciation 5,750 (millions)
Depreciation 1,100 (millions)
Income tax rate 35%
Capital expenditures(amount invested in fixed assets) 1,250 (millions)
Investment made in net operating working capital 300 (millions)
EBIT 1,400 (millions)
EBT 1240 (millions)
Tax(35%) 434 (millions)
Net income 806 (millions)
Net cash flow:
Operating activities 1,606 (millions)
Investing activities 1,250 (millions)
Net cash increase during the year 356 (millions)
Net income exceeds the free cash flow by 450 (millions)