A firm has an average investment of $10,000 during the year. During the same time, the firm generates after-tax income of $2,000.
Calculate the economic value added (EVA)for the firm. (The cost of capital is 15 percent.)
A)$500
B)$1,500
C)$2,000
D)$1,000

Question

Quizplus · Accepted Answer

EVA = Net income after taxes - (Cost of capital * Average investment)EVA = $2,000 - (0.15 * $10,000)EVA = $2,000 - $1,500EVA = $500

A Firm Has an Average Investment of $10,000 During the Year