A firm has an average investment of $1,000 during the year.During the same time,the firm generates after-tax earnings of $150.
Calculate the economic value added (EVA)for the firm.(The cost of capital is 10%.)
A)$100
B)$50
C)$120
D)$150

Question

Quizplus · Accepted Answer

EVA is calculated as Net Operating Profit After Taxes (NOPAT) minus the product of the cost of capital and the average investment. Here, EVA = $150 - (10% of $1,000) = $150 - $100 = $50.

A Firm Has an Average Investment of $1,000 During the Year.During