Asha During the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Economic Value Added, or EVA, to better assess management's performance in maximizing their shareholders' wealth. Extensive's EVA equals the additional profit created in excess of the after-tax operating income necessary to finance its total after-tax cost of capital, which is expressed in annual dollars. It is computed by subtracting Extensive's annual dollar cost of capita from its net operating profit after taxes In turn, Extensive's annual cost of capital is calculated by multiplying its total investor-supplied operating capital, which includes its net fixed assets and net operating working capital, by the after-tax percentage cost of capital. OK, given that description, here's a question for you: Compared to the book value, what is the advantage of using the EVA to evaluate the performance of Extensive's management? Rafael Give me a second to think. OK, it's better to evaluate the performance of Extensive's management by using the company's EVA rather than the book value of its shareholders' equity because the better the managerial decisions being made, the ess the after-tax net operating income earned, the less the difference between this net operating income and the cost of capital needed to generate that income, and the greater the EVA, or true economic profit, earned by the company