The EVA calculation and the ROI calculation both use operating income before income tax because the income tax expense is NOT relevant to either the EVA or the ROI measures.

Question

Quizplus · Accepted Answer

EVA calculation adjusts for taxes by using NOPAT (Net Operating Profit After Taxes), while ROI can be calculated using either pre-tax or after-tax returns, depending on the context. Taxes are relevant because they affect the actual returns to the investors.

The EVA Calculation and the ROI Calculation Both Use Operating