Which of the Following Statements Is CORRECT

question 63

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:σmva = (shares outstanding)(stock price) + book value of common equity.
• D) eva stands for economic value added, and it is defined as follows:σeva = ebit(1 σ t) σ (investor-supplied op. capital) × (a σ 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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