One problem with economic value added (EVA)adjustments is determining the appropriate life for expenditures that benefit multiple periods

Question

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Economic value added adjustments involve calculating the value of an investment by subtracting the cost of capital from the net operating profit after taxes. However, determining the appropriate life for expenditures that benefit multiple periods can be difficult as there is uncertainty in how many years the expenditure will yield benefits. This uncertainty can lead to challenges in accurately calculating EVA.

One Problem with Economic Value Added (EVA)adjustments Is Determining the Appropriate