Which of the following statements about EVA is false?
A)EVA can be improved by increasing earnings.
B)EVA can be improved by reducing the capital used.
C)EVA ranks projects with the same outlay,life and total earnings equally,even though their patterns of earnings may be different.
D)EVA can be improved either by increasing earnings or by reducing the capital used.

Question

Quizplus · Accepted Answer

This statement is false because EVA takes into account not only the amount of earnings, but also the timing and cost of the capital used to generate those earnings. Therefore, projects with different patterns of earnings would not be ranked equally, as EVA would consider the time value of money and the cost of capital. The other statements are true.

Which of the Following Statements About EVA Is False