Which of the Following Statements Is CORRECT

question 62

Multiple Choice

Which of the following statements is CORRECT?

• A) MVA stands for "market value added" and 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 is defined as follows:
• EVA = NOPAT - (Total invested capital)(AT cost of capital %)

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Definitions:

Formula

A symbolic expression that defines a rule or relationship in mathematics.

Labor

The exertion of human mental and physical strength in the process of producing goods and rendering services.

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogeneous products, and no barriers to entry or exit, leading to perfect information and the inability of any single entity to influence the market price.