Westbrook Inc. is financed with debt that costs it 5% (pre-tax)or $12.5m annually and expects to generate an EBITof $50m per year perpetually.
The company is at its target debt/equity ratio of 1. Depreciation is expected to remain at $2.5m annually and taxes at the rate of 40% (for the foreseeable future).
It pays out all its net income as dividends. The risk-free rate (RF) is 3% and the market risk premium(MRP) is 7%. Westbrook's Beta is 1.0.
What is Westbrook's anticipated annual Economic Value Added (EVA)?