Which of the Following Statements Is CORRECT

question 3

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) * (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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Definitions:

Surety

represents a guarantee or security provided by a third party, ensuring the fulfillment of an obligation.

Surety

A person or entity that takes responsibility for another's performance of an undertaking, such as fulfilling the terms of a contract.

Principal's Obligation

A duty or responsibility that a principal must fulfill as part of an agreement, particularly in agency relationships.

Repayment Period

The time frame agreed upon within a loan agreement for the borrower to pay back the borrowed amount plus any applicable interest.