Economic Value Added (EVA) is calculated as follows:
A) EVA = Income Earned - (cost of debt) * (investment)
B) EVA = Income Earned - (cost of equity) * (investment)
C) EVA = Income Earned - (cost of capital) * (investment)
D) none of the above

Question

Quizplus · Accepted Answer

EVA is the measure of a company's economic profit or value created for shareholders. It is calculated by subtracting the cost of capital from the company's net operating profit after tax. Therefore, the correct formula for calculating EVA is EVA = Income Earned - (cost of capital) * (investment). Option C provides the accurate formula for calculating EVA.

Economic Value Added (EVA) Is Calculated as Follows