BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Extra Value Analysis
|
|
|
Economic Value Added
|
|
|
Expected Value Analysis
|
|
|
Engineering Value Analysis
|
Detailed explanation-1: -Economic value added (EVA), also known as economic profit, aims to calculate the true economic profit of a company. EVA is used to measure the value a company generates from funds invested in it.
Detailed explanation-2: -How is economic value added (EVA) calculated? It is the difference between the market value of the firm and the book value of equity. It is the firm’s net operating profit after tax (NOPAT) less a dollar cost of capital charge.
Detailed explanation-3: -Answer» D. how much wealth a company is creating compared to its cost of capital.
Detailed explanation-4: -An economic value added formula is used to find this metric. The EVA formula is (net profit after tax-(capital invested x WACC)).
Detailed explanation-5: -Examples of how to calculate EVA Based on the information, they add the equity and debt for a capital invested of $55, 000. They multiply 455, 000 by 0.09 for a finance charge of $4, 950. They subtract $4, 950 from $8, 000 for a result of $3, 050. The EVA of the investment is $3, 050, indicating it was a good investment.