EVA® NOPAT and EVA® Capital; Financing Approach Refer to Problem 19-44 for reported financial statement data for Nimrod Inc.
Required 1. Using the financing approach, prepare an estimate of EVA® NOPAT. In addition to the preceding data, you discover the following: increase during the year of the LIFO reserve, $2; imputed interest expense on non-capitalized leases, $4; and increase in deferred tax liability during the year, $5. 2. What is the rationale for the various adjustments you made to the company’s reported income statement? 3. Using the financing approach, prepare an estimate of EVA® capital. In addition to the preceding information, you note the following: end-of-year value of the LIFO reserve, $10; and present value of noncapitalized leases, $50. 4. What is the rationale for the adjustments you made to reported balance sheet amounts in order to estimate EVA® capital? 5. Given the company’s WACC, what is the estimated EVA® for the year? 6. How do you interpret the company’s EVA® for the year?
Problem 19-44~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
EVA® NOPAT and EVA® Capital: Operating Approach You are provided with the following financial statement information from Nimrod Inc. for its most recent fiscal year:
The statement of income for the company for the year just ended is as follows
Required
1. Using the operating approach, prepare an estimate of EVA® NOPAT. In addition to the preceding data, you discovered the following: increase during the year of the LIFO reserve, $2; imputed interest expense on non-capitalized leases, $4; and increase in deferred tax liability during the year, $5. (Hint: The amount of cash taxes paid on operating profit during the year is $25.) 2. What is the rationale for the various adjustments you made to the company’s reported income statement? 3. Using the operating approach, prepare an estimate of EVA® capital. In addition to the preceding information, you note the following: end-of-year value of the LIFO reserve, $10; and present value of noncapitalized leases, $50. 4. What is the rationale for the adjustments you made to reported balance sheet amounts in order to estimate EVA® capital? 5. Given the company’s WACC, what is the estimated EVA® for the year? 6. How do you interpret the company’s EVA® for the year?