How is EVA (economic value added)calculated?
A)Net Operating Profit After Tax - [Weighted-Average Cost of Capital ´ (Total Assets - Non-Interest-Bearing Debt)].
B)the amount of earnings generated above the cost of funds invested to generate those earnings.
C)Net Operating Profit After Tax - [Weighted-Average Cost of Capital ´ (Total Assets - Non-Interest-Bearing Debt)],and the amount of earnings generated above the cost of funds invested to generate those earnings.
D)None of the answers is correct.

Question

Quizplus · Accepted Answer

EVA is calculated as Net Operating Profit After Tax minus the product of the Weighted-Average Cost of Capital and the capital invested (Total Assets minus Non-Interest-Bearing Debt). This formula essentially measures the amount of value created above the required return of the company's investors, aligning with the description in choice C.

How Is EVA (Economic Value Added)calculated