Calculate Lucas Corp's Economic Value Added (EVA)

What is Lucas Economic Value Added (EVA) amount?

Given data:
Contribution Margin: $4,500,000
Fixed Expenses: $3,500,000
Invested Capital: $2,500,000
Average Cost of Capital: 7.5%
Tax Rate: 40%

Answer:

Lucas Corp's Economic Value Added (EVA) is $2,512,500.

To calculate Economic Value Added (EVA), we subtract the cost of capital from the Net Operating Profit After Taxes (NOPAT). In this case, we can calculate Lucas Corp's EVA using the provided data:

Net Operating Profit After Taxes (NOPAT) can be calculated as follows:

NOPAT = Contribution Margin - Taxes
= $4,500,000 - (0.4 x $4,500,000)
= $2,700,000

Economic Value Added (EVA) formula:
EVA = NOPAT - (Invested Capital x Cost of Capital)

Calculate EVA:
EVA = $2,700,000 - ($2,500,000 x 0.075)
EVA = $2,700,000 - $187,500
EVA = $2,512,500

Therefore, Lucas Corp's Economic Value Added (EVA) is $2,512,500. EVA is a useful metric for evaluating a company's performance and assessing its profitability.

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