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The lesson formally states the Economic Value Added (EVA) formula using two key inputs. Which equation correctly captures EVA as set out in the lesson?
Answer & Solution
Correct answer: B.
1. The lesson sets out EVA as a value-based performance measure.
2. It states EVA equals NOPAT minus (Cost of Capital times Capital).
3. NOPAT is the Net Operating Profit After Tax.
4. The other expressions are gross margin, return on equity and EBT, not EVA.
_Source: ICSI CS Executive Paper 8 (Financial and Strategic Management) — Lesson 1: Nature, Significance and Scope of Financial Management, pp. 6-20._
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