Which one of these costs accounts for the difference between accounting income and economic value added?
A) depreciation
B) cost of capital
C) taxes
D) dividends

Question

Quizplus · Accepted Answer

The cost of capital is the cost of the funds used to finance the company's operations, including equity and debt. Economic value added (EVA) takes into account the cost of capital, whereas accounting income does not. Therefore, the cost of capital accounts for the difference between accounting income and EVA. The other options, depreciation, taxes, and dividends, are all reflected in both accounting income and EVA.

Which One of These Costs Accounts for the Difference Between