Which of the following shows the calculation for economic value added (EVA)?]
A)EVA = NOPAT + After-Tax Dollar Cost of Financial Capital Used
B)EVA = ROE - Percentage Cost of Financial Capital
C)EVA = NOPAT - After-Tax Dollar Cost of Financial Capital Used
D)EVA = ROE + Percentage Cost of Financial Capital

Question

Quizplus · Accepted Answer

The correct formula for economic value added (EVA) is EVA = NOPAT - After-Tax Dollar Cost of Financial Capital Used. This calculation takes into account the cost of capital in addition to the company's profits, giving a more accurate representation of the true economic value created. Option A includes the correct calculation for after-tax cost of capital, but adds it to NOPAT rather than subtracting it. Option B is incorrect as it uses return on equity (ROE) rather than NOPAT. Option D is also incorrect as it adds rather than subtracts the cost of capital.

Which of the Following Shows the Calculation for Economic Value