CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

Given the following information:

  • NOPAT = $100.
  • Beginning book value of debt = $200.
  • Beginning book value of equity = $400.
  • Pre-tax cost of debt = 6%.
  • Cost of equity = 12%.
  • Tax rate = 40%.

The EVA should be ______.
A. $52
B. $44.8
C. $63.2
Explanation: WACC = 0.06 x (1 - 0.4) x 200/600 + 0.12 x 400/600 = 9.2%.
EVA = NOPAT - WACC x beginning book value of assets = 100 - 0.092 x 600 = $44.8.

User Contributed Comments 2

User Comment
bbadger 400(.12) = 48m, 200(.06(1 -.4)) = 7.2m, 48 + 7.2 = 55.2, 100 - 55.2 = 44.8
birdperson i did it the same was as @bbadger
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