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Other information:
1
(i) Total Inc had non-capitalized leases valued at Rs 10 crore in each
year 1999-2001.
(ii) Balance sheet capital employed at the end of 1999 was Rs 223
crore.
(iii) The companys pre-tax cost of debt was estimated to be 9% in
2000, and 10% in 2001.
(iv) The companys cost of equity was estimated to be 15% in 2000 and
17% in 2001.
(v) The target capital structure is 60% equity, 40% debt.
(vi) The effective tax rate was 35% in both 2000 and 2001
(vii) Economic depreciation was Rs 30 crore in 2000 and Rs 35 crore in
2001.
(viii) Other non-cash expenses were Rs10 crore per year in both 2000
and 2001.
(ix) Interest expense was Rs 4 crore in 2000 and Rs 6 crore in 2001.
Required:
Estimate the Economic Value Added (EVA) for Total Inc for both 2000 and
2001. State clearly any assumptions that you make. Comment upon the
performance of the company.