1) ABC Inc. Reported= $14,500 of sales and= $7,025 of operating costs (including depreciation). Company had= $18,750 of investor-supplied operating capital, weighted average cost of that capital (the WACC) was 11.5%, and federal-plus-state income tax rate was= 34%. Determine the ABC's Economic Value Added (EVA), that is., how much value did management add to stockholders' wealth in the year?
2) Wells Water Systems just reported $9,250 of sales, $4,750 of operating costs other than depreciation, and $900 of depreciation. Company had no amortization charges, it had= $3,250 of outstanding bonds which carry= 6.75% interest rate, and its federal-plus-state income tax rate was 34%. To sustain its operations and therefore generate sales and cash flows in future, firm was needed to spend $750 to buy new fixed assets and to invest= $250 in net operating working capital. How much free cash flow did Wells make?