Prosperous Bank has a criterion that it will give loans to companies that have an economic value added (EVA) greater than zero for the past three years on an average. Bank is considering lending money to a small company that has characteristics shown below:
(i) Average operating income after tax equals to Rs. 25,00,000 per year for the last 3 years.
(ii) Average total assets over the last 3 years equals Rs. 75,00,000.
(iii) Weighted average cost of capital appropriate for the company is 10%, applicable for all 3 years.
(iv) Company’s average current liabilities over past 3 years are Rs. 15,00,000.
Economic Value Added = ?
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