Which of the Following Statements Is CORRECT

question 118

Multiple Choice

Which of the following statements is CORRECT?

• A) MVA stands for market value added, and it is defined as follows: MVA = (Shares outstanding)(Stock price) + Book value of common equity.
• B) 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.
• C) MVA gives us an idea about how much value a firm's management has added during the last year.
• D) EVA gives us an idea about how much value a firm's management has added over the firm's life.
• E) EVA stands for economic value added, and it is defined as follows:
• EVA = NOPAT – (Investor-supplied oper. capital)(AT cost of capital %)

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Uncertainty Avoidance

A cultural system of rules that minimizes ambiguity.

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