Which of the Following Statements Is CORRECT

question 65

Multiple Choice

Which of the following statements is CORRECT?

• A)The primary difference between EVA and accounting net income is that when net income is calculated, a deduction is made to account for the cost of common equity, whereas EVA represents net income before deducting the cost of the equity capital the firm uses.
• B)MVA gives us an idea about how much value a firm's management has added during the last year.
• C)MVA stands for market value added, and it is defined as follows: MVA = (Shares outstanding)(Stock price) + Book value of common equity.
• D)EVA stands for economic value added, and it is defined as follows: EVA = EBIT(1-T) - (Investor-supplied op.capital) x (A-T cost of capital).
• E)EVA gives us an idea about how much value a firm's management has added over the firm's life.

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