Refer to the data in the preceding exercise for Golden Gate Construction Associates. The company has two divisions: the real estate division and the construction division. The divisions’ total assets, current liabilities, and before-tax operating income for the most recent year are as follows:
|
Division |
Total Assets |
Current Liabilities |
Before-Tax Operating Income |
|
Real estate |
100,000,000 |
6,000,000 |
20,000,000 |
|
Construction |
60,000,000 |
4,000,000 |
18,000,000 |
Required:
Calculate the economic value added (EVA) for each of Golden Gate Construction Associates’ divisions. (You will need to use the weighted-average cost of capital, which was computed in the preceding exercise.)