One calculates EVA as follows:
A)EVA = (ROI − r)× (capital invested), where r = cost of capital.
B)EVA = (ROI + r)× (capital invested), where r = cost of capital.
C)EVA = (ROI)× (capital invested).
D)EVA = (ROI)/(capital invested).

Question

Quizplus · Accepted Answer

EVA (Economic Value Added) is calculated by subtracting the cost of capital (r) from the return on investment (ROI) and then multiplying that result by the capital invested. Therefore, the correct formula is EVA = (ROI - r) x (capital invested).

One Calculates EVA as Follows