Basically, EVA is residual income with the cost of capital equal to the actual cost of capital for the firm (as opposed to some minimum rate of return desired by the company for other reasons).

Question

Quizplus · Accepted Answer

This statement accurately describes the concept of Economic Value Added (EVA) as a measure of residual income based on the actual cost of capital for the firm. This is in contrast to other measures, such as net income or accounting profit, which may not account for the opportunity cost of capital or the cost of equity. EVA can be a useful tool for evaluating the performance of a company or business unit by comparing the amount of value created above the cost of capital.

Basically, EVA Is Residual Income with the Cost of Capital