One of the difficulties sometimes associated with using EVA is that the average cost of capital is a weighted average.

Question

Quizplus · Accepted Answer

EVA (Economic Value Added) calculations involve subtracting the cost of capital from the net operating profit after taxes. The cost of capital is indeed a weighted average of the costs of debt and equity, reflecting the relative proportions in which a company finances its operations. This can make the calculation complex, especially in determining the appropriate weights and costs for each component.

One of the Difficulties Sometimes Associated with Using EVA Is