A negative EVA (Economic Value Added)for the year implies that the firm has not earned enough during the year to cover its total cost of capital and the value of the firm has declined.

Question

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A negative EVA means that the firm's net operating profit after taxes (NOPAT) is less than the total amount of capital it has employed. Therefore, the value of the firm has declined as the firm has not generated enough returns to cover its cost of capital.

A Negative EVA (Economic Value Added)for the Year Implies That