Economic value added (EVA) is
A) the difference between the return on assets and the opportunity cost of capital times the capital base.
B) ROA × ROE.
C) a measure of the firm's abnormal return.
D) largest for high-growth firms.

Question

Quizplus · Accepted Answer

Economic value added (EVA) is calculated as the difference between the return on assets (ROA) and the opportunity cost of capital (which is the rate of return an investor expects to earn on an investment with similar risk) multiplied by the capital base. This gives an indication of how much value a firm has created after taking into account the cost of capital used to generate returns.

Economic Value Added (EVA) Is