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Worldatwork Exam c8 Topic 3 Question 63 Discussion

Actual exam question for Worldatwork's c8 exam

Question #: 63
Topic #: 3

[All c8 Questions]

The XYZ Company opened a new manufacturing facility with a capital investment of 10,000,000. The cost to obtain the capital was 8%. In its first year of operations, the facility's net operating profit after taxes was 10,500,000. What was the economic value added (EVA) using the EVA formula?

A500,000

B840,000

C8,000,000

D9,700,000

Show Suggested Answer

Suggested Answer: D

by Margart at Feb 07, 2024, 03:35 PM

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Vallie

1 years ago

That would be 10,500,000 - 800,000 = 9,700,000. So, my answer is D) 9,700,000.

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Samira

1 years ago

Yes, that's correct. So, it would be 10,500,000 - (10,000,000 * 8%) = EVA.

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Marjory

1 years ago

I think the EVA formula includes subtracting the cost of capital from the net operating profit after taxes.

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Roy

1 years ago

Candidate 1: It's interesting to see different perspectives on this question, I guess we'll have to go with our best judgement during the exam.

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Audra

1 years ago

Candidate 2: I understand where you're coming from, but I still think option B) 840,000 is the most accurate answer based on the formula.

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Jospeh

1 years ago

Candidate 4: I'm leaning towards option A) 500,000 as well, it seems to make sense given the numbers provided.

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Dominque

1 years ago

Candidate 3: I see your point, but I think the EVA would actually be 9,700,000 considering the capital investment and the profit generated.

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Alline

1 years ago

Candidate 2: I disagree, I believe the EVA would be 840,000 because the net operating profit after taxes was higher than the cost of capital.

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Azzie

1 years ago

Candidate 1: I think the economic value added (EVA) would be 500,000 based on the EVA formula.

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