Which of the Following Statements Is CORRECT

question 62

Multiple Choice

Which of the following statements is CORRECT?

• A) MVA stands for "market value added" and is defined as follows:
• MVA = (Shares outstanding)(Stock price)+ Book value of common equity.
• B) 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.
• C) MVA gives us an idea about how much value a firm's management has added during the last year.
• D) EVA gives us an idea about how much value a firm's management has added over the firm's life.
• E) EVA stands for "economic value added" and is defined as follows:
• EVA = NOPAT - (Total invested capital)(AT cost of capital %)

---

Definitions:

Profit Center

A segment or division of a company that is directly responsible for generating its own revenue and profit.

Cost Center

A department or function within a business to which costs are charged for accounting purposes, but does not directly generate revenue.

Investment Center

A business unit or segment within an organization that is responsible for its own revenues, expenses, and investments in assets.

Gross Profit

The difference between revenue and the cost of goods sold, indicating the efficiency of a company in managing its labor and supplies in the production process.