For 2018, Gourmet Kitchen Products reported $23 million of sales and $18 million of operating costs (including depreciation). The company has $15 million of total invested capital. Its after-tax cost of capital is 10% and its federal-plus-state income tax rate was 35%. What was the firm's economic value added (EVA), that is, how much value did management add to stockholders' wealth during 2018? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary.

$1,750,000

Explanation:

Economic value added (EVA) = Net operating profit after taxes - Invested capital * Cost of capital

Economic value added (EVA) = [($23,000,000 - $18,000,000)*(1 - 0.35)] - [$15,000,000*10%]

Economic value added (EVA) = $5,000,000*(0.65) - $1,500,000

Economic value added (EVA) = $3,250,000 - $1,500,000

Economic value added (EVA) = $1,750,000

Hence, the management add the value of $1,750,000 to stockholders' wealth during 2018.

I. Percentage of the portfolio invested in each individual security.

II. Projected states of the economy.

III. The performance of each security given various economic states.

IV. Probability of occurrence for each state of the economy.

Explanation: The expected return on a portfolio is the amount of revenue or income expected to be generated from the investment made on a portfolio( which is a group of financial assets like Stocks and non financial assets like Art

works etc).

THE EXPECTED RATE OF RETURN IS AFFECTED BY BOTH PERCENTAGE OF THE PORTFOLIO INVESTED IN EACH SECURITY,

THE PROJECTED OR FORCASTED STATE OF THE ECONOMY,

THE PERFORMANCE OF EACH SECURITY CONSIDERING DIFFERENT SITUATIONS,

THE PROBABILITY OF OCCURRENCE FOR EACH STATE OF THE ECONOMY ETC.