The following information is available of a concern. Calculate Economic Value Added (EVA) : (i) 12% Debt capital: ₹2,000 crores (ii) Equity capital: ₹500 crores (iii) Reserve and Surplus: ₹7,500 crores (iv) Risk Free rat

1. Calculate Cost of Debt (Kd): Post-tax cost of Debt = Pre-tax cost × (1 - Tax rate) Kd = 12% × (1 - 0.30) = 12% × 0.70 = 8.40% 2. Calculate Cost of Equity (Ke) using CAPM: Ke = Risk-free rate + Beta × (Market rate of return - Risk-free rate) Ke = 9% + 1.05 × (19% - 9%) Ke = 9% + 1.05 × 10% Ke = 9% + 10.5% = 19.5% 3. Calculate Total Capital Employed: Total Capital Employed = Debt Capital + Equity Capital + Reserve and Surplus Total Capital Employed = ₹2,000 crores + ₹500 crores + ₹7,500 crores = ₹10,000 crores 4. Calculate Weighted Average Cost of Capital (WACC): WACC = [(Equity + Reserve & Surplus) / Total Capital] × Ke + [Debt / Total Capital] × Kd Equity + Reserve & Surplus = ₹500 crores + ₹7,500 crores = ₹8,000 crores WACC = [(₹8,000 crores / ₹10,000 crores) × 19.5%] + [(₹2,000 crores / ₹10,000 crores) × 8.40%] WACC = [0.80 × 19.5%] + [0.20 × 8.40%] WACC = 15.60% + 1.68% = 17.28% 5. Calculate Economic Value Added (EVA): EVA = NOPAT - (WACC × Average Capital Employed) EVA = ₹2,100 crores - (17.28% × ₹10,000 crores) EVA = ₹2,100 crores - ₹1,728 crores EVA = ₹372 crores