A Firm Produces $65 Million of Net Income on $2,030

question 36

Multiple Choice

A firm produces $65 million of net income on $2,030 million of assets. Given that investors expect a 5 percent return, what is the EVA?

• A)−$65 million
• B)−$36.5 million
• C)$32.6 million
• D)$65.1 million

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Definitions:

Realized Gains

Profits that result from selling an asset at a higher price than its cost.

Other Comprehensive Income

Earnings that are not part of net income, consisting of items such as unrealized gains and losses on certain investments.

Retained Earnings

The portion of net income that is retained by the corporation instead of being paid out as dividends to shareholders.

Earnings Management

The practice of using accounting techniques to produce financial reports that may paint an overly positive picture of a company's business activities and financial position.