What Is the Formula for Calculating Economic Value Added (EVA)

question 15

Multiple Choice

What is the formula for calculating economic value added (EVA) ?

• A) margin - total annual cost of capital
• B) operating income - average cost of capital
• C) operating income - total annual cost of capital
• D) operating income - taxes and the total annual cost of capital

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Definitions:

Foreign Exchange Gain

Profit arising from fluctuations in exchange rates which increase the value of foreign currency-denominated assets.

Exchange Rate

The valuation of a currency when converted to a different currency, which indicates the equivalent amount in the second currency.

Payment Date

The specific date on which dividends are actually paid out to shareholders or when a debt obligation must be repaid.

Controlling Influence

The power to govern the financial and operating policies of another entity through ownership, contract, or otherwise, often resulting in a parent-subsidiary relationship.