SIDC Module 12 Corporate finance, restructuring and the investment environment question: economic value added

SIDC Module 12Corporate finance, restructuring and the investment environment

A division earns net operating profit after tax of RM120 million on invested capital of RM1,000 million. Its WACC is 9%. What is its economic value added?

A RM30 million
B RM51.6 million
C RM90 million
D RM120 million

Show the answer and explanation

Answer: A. RM30 million

EVA = NOPAT − WACC × invested capital = 120 − 0.09 × 1,000 = RM30 million: the division earns RM30 million more than its capital costs. RM120 million is NOPAT before the capital charge. RM90 million is the capital charge itself. RM51.6 million applies a tax shield to the capital charge again, although the WACC is already an after-tax rate. Source: SIDC Module 12 Study Outline (Jul-Dec 2026) Section 8 (Topics 1, 3, 4, 8, 16, 17); Brealey, Myers and Allen, Principles of Corporate Finance (as at October 2026).

Common mistake

Forgetting the capital charge, or adjusting an after-tax WACC for tax again.

Practise more Module 12 Corporate finance, restructuring and the investment environment questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Study note: Corporate finance, restructuring and the investment environment SIDC Module 12 practice questions & mock exams

Related SIDC Module 12 questions

A company's debt and equity have a combined market value of RM1,500 million. Investors have supplied RM1,000 million of capital. What is its market value added?A company's market-value capital is 60% equity at a cost of 12% and 40% debt at a pre-tax cost of 6%. The tax rate is 24%. What is its WACC?An all-equity firm is worth RM800 million. It borrows RM300 million permanently and uses it to buy back shares. With corporate tax at 24% and MM's assumptions with taxes, what is the geared firm's value?

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practising →

Original study material mapped to the public SIDC Module 12 syllabus. Unofficial, not endorsed by SIDC or the SC. Verify figures and rules against current guidance before relying on them.