1. High Cost of Capital: Explanation: The division's cost of capital, which is the minimal return investors expect in exchange for using their money, is more than its return on investment (ROI). This shows that not enough money is being made by the division to pay for the cost of capital. 2. Capital Intensity: Explanation: To function successfully, the division might need a large amount of capital, which would raise capital costs. Even if the division is making money, the high capital expenses can prevent the profits from being enough to offset them, leaving the division with a negative EVA 3. Inefficient Capital Allocation: Explanation: The division may have invested in projects or assets that do not generate returns above the cost of capital. This misallocation of capital can lead to a positive ROI but a negative EVA