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how can I understand what capital structure is in the company. It is impossible to calculate wacc, it is not obvious from the answers, please help.
There’s no interest charge in the income statement so the only thing you can assume is that it’s purely equity funded so the WACC must therefore be 9% …
net operating profit 386
Less Tax: (115.8)
Add non cash exp 4
=274.2
Less 1294@9% (116.46)
=157.74 is EVA (158 per exam answer)EVA involves a lot of assumptions so always use your best judgement to identify what figure would suit in the given question. This time i think EVA will have year on year i.e. They may give us a simple income statement for two years and you have to calculate the EVA be careful that you always use the opening balance of the capital employed. This is the trick read the article published for this. Its very very Important. Good luck all with your exams…:)
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