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Racer Corp. acquired all of the common stock of Tangiers Co. in 2009. Tangiers maintained its incorporation. Which of Racer's account balances would vary between the equity method and the initial value method?
Net Cash Flow
Net cash flow is the total amount of money being transferred into and out of a business, particularly in reference to the amount of liquidity.
Economic Value Added (EVA)
A method used to measure a firm’s true profitability. EVA is found by taking the firm’s after-tax operating profit and subtracting the annual cost of all the capital a firm uses. If the firm generates a positive EVA, its management has created value for its shareholders. If the EVA is negative, management has destroyed shareholder value.
Net Operating Profit After Taxes (NOPAT)
A company's operating profit after adjusting for taxes, useful for comparing the profitability of businesses.
Weighted Average Cost of Capital
A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to assess the cost of funding new projects.
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