A Firm Has an Average Investment of $10,000 During the Year

question 64

Multiple Choice

A firm has an average investment of $10,000 during the year. During the same time, the firm generates after-tax income of $2,000.
Calculate the economic value added (EVA) for the firm. (The cost of capital is 15 percent.)

• A)$500
• B)$1,500
• C)$2,000
• D)$1,000

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Definitions:

Journal Entry

A journal entry is a record of a business transaction in the accounting books, detailing the financial effects of that transaction.

Net Income

The company's net income following the deduction of all costs and taxes from its earnings.

Income-Sharing Ratio

The proportionate distribution of profit or loss among partners in a partnership according to their agreed percentages.

Net Assets

The total assets of a company or individual minus all its liabilities, representing the owners' or shareholders' equity.