Roterblade Company supplies helicopters to corporate clients

Accounting Dec 08, 2020

Roterblade Company supplies helicopters to corporate clients. Roterblade has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million (book value of $8 million). The cost of equity capital for Roterblade is 15%, and its tax rate is 30%. Roterblade has profit centers in four divisions that operate autonomously. The company's results for 2020 are as follows:

Operating income Assets Current liabilities

New York $1,750,000 $11,500,000 $2,500,000

Chicago 2,400,000 9,000,000 3,500,000

Dallas 4,675,000 27,500,000 9,500,000

Los Angeles 4,200,000 25,000,000 8,000,000

Compute the Chicago division's Economic Value Added

A $1,494,100

B $335,800

C $1,136,600

D $1,260,400

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