1031 Economic Value Added SE7 Complete the current liabiliti

1031 Economic Value Added SE7. Complete the current liabilities, total assets - current liabilities, and economic value added calculations for investment centers M and N. Sales After-tax operating income Total assets Current liabilities Total assets- current liabilities Cost of capital Economic value added Center M $15,000 $1,000 $4,000 $1,000 Center N $18,000 $1,100 $5,000 $3,500 15% 15% 3 The Balanced Scorecard: Stakeholder Values ach stakeholder groups

Solution

Center M

Center N

Sales

$15,000

$18,000

After Tax operating Income

$1,000

$1,100

Total Assets

$4,000

$5,000

Current Liabilities

$1,000

$1,500

Total Assets – Current Liabilities

$3,000

$3,500

Cost of capital

15%

15%

Economic Value Added

$550

$575

Center M

Total Asset – Current Liabilities = $4,000 – 1,000 = $3,000

Center N

Current Liabilities = $5,000 – 3,500 = $1,500

Economic Value Added

Economic Value Added = After Tax Net Operating Income – [ (Total Assets – Current Liabilities) x Cost of Capital]

Economic Value Added – Center M

= $1,000 – [ $3,000 x 15%]

= $1,000 – 450

= $550

Economic Value Added – Center N

= $1,100 – [ $3,500 x 15%]

= $1,100 – 525

= $575

	Center M	Center N
Sales	$15,000	$18,000
After Tax operating Income	$1,000	$1,100
Total Assets	$4,000	$5,000
Current Liabilities	$1,000	$1,500
Total Assets – Current Liabilities	$3,000	$3,500
Cost of capital	15%	15%
Economic Value Added	$550	$575