10.Economic Value Added ('EVA') is Residual Income adjusted for

1. noninterest-bearing current liabilities.
2. interest-bearing current liabilities.
3. financing costs that the manager is unable to control.
4. None of the above.

11. Risk-Reward Limited is a well-funded, highly profitable start-up in the fast-growing fitness App space.The ease of use of its Apps has been absolutely central to its success.It is about to launch a new suite of cycling Apps and is considering taking advantage of slightly lower labour costs offshore and outsourcing the development.The alternative is to take on the additional fixed cost of more in-house developers.Based on the facts provided, what advice would you give Risk-Reward Limited?

A.Additional fixed costs will increase operational leverage which is never desirable.

B.Outsourcing offers reduced per unit labour costs and therefore should be pursued.

C.Taking on the additional fixed cost appears on balance more attractive.

D.The answer depends on the Degree of Operating Leverage.