How Does EVA Encourage the Right Kind of Behaviour from Divisions

question 92

Multiple Choice

How does EVA encourage the right kind of behaviour from divisions?

• A)through its emphasis on after-tax net income
• B)through its emphasis on total capital employed
• C)through its emphasis on true cost of capital
• D)through its emphasis on before-tax operating income

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Definitions:

Underlying Stock

The security on which a derivative instrument, such as an option or a warrant, is based.

Black-Scholes Option Pricing Model

A mathematical model used to determine the theoretical price of European put and call options, incorporating factors like volatility and time to expiration.

Strike Price

The fixed price at which the holder of an option can buy (call) or sell (put) the underlying security or commodity.

Call

In finance, an option contract giving the owner the right, but not the obligation, to buy a specified amount of an underlying asset at a specified price within a specified time.