Problem:
Smith's Shoe Shop had $4,000,000 in operating income last year, after-tax cost of capital of 7%, and a tax rate of 35%.
The company has $14,000,000 in stockholder's equity, $17,000,000 in long-term bonds, and $1,500,000 in preferred stock.
Required:
Question 1: What is the company's EVA?
Question 2: What does the EVA represent?
Please provide all calculation and methods to solve it.