Economic Value Added (EVA)

question 7

Multiple Choice

Economic value added (EVA) :

• A)uses the same basic formula as return on investment (ROI)
• B)ignores R&D spending
• C)decreases a manager's incentive to maximize firm value
• D)is easy to administer
• E)measures the total return after deducting the cost of all capital employed by the firm

---

Definitions:

Selling Price

The amount of money charged for a product or service, determined by considering factors such as cost of production, market demand, and competitors' prices.

Cost-plus Pricing

A pricing strategy where the selling price of a product is determined by adding a specific markup to its total cost.

Target Selling Price

The price at which a company aims to sell its product, usually based on market research and cost-plus profit considerations.

Outsourcing Production

The business practice of having goods or services produced by external organizations, typically to reduce costs.