Ere are simplified financial statements for Watervan Corporation: INCOME STATEMENT
(Figures in $ millions)
Net sales $
888.00

Cost of goods sold
748.00

Depreciation
38.00

Earnings before interest and taxes (EBIT) $
102.00

Interest expense
19.00

Income before tax $
83.00

Taxes
17.43

Net income $
65.57

BALANCE SHEET
(Figures in $ millions)
End of Year Start of Year
Assets
Current assets $
376

$
326

Long-term assets
272

229

Total assets $
648

$
555

Liabilities and shareholders’ equity
Current liabilities $
201

$
164

Long-term debt
115

128

Shareholders’ equity
332

263

Total liabilities and shareholders’ equity $
648

$
555

The company’s cost of capital is 8.5%.

a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

d. Is the company creating value for its shareholders?