What Is the Residual Income or EVA for a Firm

question 106

Multiple Choice

What is the residual income or EVA for a firm with $1 million in total capital, $300,000 in net income, and a 20 percent cost of capital?

• A)$100,000
• B)$140,000
• C)$240,000
• D)$500,000 Total capital x cost of capital
• $1 million x .2 = $200,000
• Residual income = Net Income - Cost of Capital
• = 300,000 - 200,000

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