Calculate Economic Value Addition (EVA) : Equity Share Capital: ₹5,00,000 13% Preference Share Capital: ₹2,00,000 Reserves and Surplus: ₹6,00,000 Non trade investments (Face value ₹1,00,000) Rate of Interest: 10% 20% Deb

Economic Value Added = (Return on operating capital - weighted average cost of capital) x Operating capital. Working Note - 1 Calculation of Return on Operating Capital: NOPAT = ₹ Profit before tax 2,00,000 +Interest Expense 60,000 -Non operating income 10,000 Operating EBIT 2,50,000 Less of economic taxes@ 40% 1,00,000 NOPAT 1,50,000 Working Note - 2 Calculation of Operating Capital ₹ Equity Share capital 5,00,000 Reserves and surplus 6,00,000 13% Preference shares 2,00,000 20% Debentures 3,00,000 Total 16,00,000 Less: non-operating assets 1,00,000 Operating capital 15,00,000 ROOC = 1,50,000/15,00,000 x 100 = 10% EVA = (10% - 13%) 15,00,000 = ₹(45,000) Alternative Answer EVA = NOPAT – (operating Capital X WACC) = 150,000 – (15,00,000 x 13%) = 1,50,000 – 195,000 = ₹(45,000)