EVA calculation....urgent plzzzz?????

it is from june 09 final new course.....

Workings:

1.operating capital-

Share capital              2000

+Reserves                  4000

+Long term Debt         400=     6400

2. NOPAT-

PBIT                                      2000

(-)non operating income      nil

                                               2000

(-) Economic Taxes(30%)    600

                              NOPAT    1400

3. Weighted Average Cost of capital-

Calculated as 15.7675%,

4. Return on operating Capital-

   NOPAT/ Operating Capital * 100= 15.76%

Solution:-

EVA=( Return on operating Cap - WACC ) * Operating Capital

       = 39088

the logic behind using Nopat is to include economic cost of capital in our computation. when we deduct  economic taxes on amt before interest, we ignore the financing policy of the company & just focus on how effectively it has utilised its fund..

thanks a lot  ashish

can u give me ur email id

i have to ask somthing more

yes, but i check it very less, most of the time i m on caclubindia.... my id is ojha.ashish @ rocketmail.com

well i get u but in ur solution return on operating capital would be 21.875% ie 1400/6400*100

but look at this too...FIRST

EBIT                                               2000

LESS INT.                                           40

                                                          1960

LESS TAX  30%                               588

                                                           1372

ADD INT (AFTER TAX)                       28

           NOPAT                                   1400

SECOND VIEW

EBIT                                               2000

LESS INT.                                           40

                                                          1960

LESS TAX  30%                               588

                                                           1372

ADD INT                                                40

           NOPAT                                   1412

AT THIS POINT I AM CONFUSED...ABT INTEREST...

WHAT IS THE ADJUSTEMENT  IF THERE IS ....PBT OR PAT IS GIVEN....

THANX

we have nothing to do with interest amt while calculating NOPAT.....

this amt is given to calculate rate of interst, i.e. 10% for the computation of WACC.. thats it

ignore it while calculating NOPAT

ok

but in suggested first view is given

and u did not tell me what will be adjstment

if there is PBT or PAT is given instead of EBIT?

will be the same adjstment ?

in jks vora sir has done sums as per d second view but sir told us dat suggested has done differently but m followin my sirs method!

Yar Praveen Sharma Sir ne b Interest ko ignore kiya hai, But in the RTP issued by the institute has done the solution as per first view, so that its a topic for confusion. Let me know which view is to be treated correct.