Josh Well, because Atherton's book value firm's shares, the firm's book value price of the firm's common stock and therefore performance. with changes in the market price of the reflect management's efforts to maximize the be used to evaluate management's Now, what about "Economic Value Added? Mia 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. Atherton'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 Atherton's from its In turn, Atherton's annual cost of capital is calculated by multiplying its total 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 operating capital, which includes its net fixed assets and net operating advantage of using the EVA to evaluate the performance of Atherton's management? Josh Give me a second to think.. . OK, it's better to evaluate the performance of Atherton'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 operating income earned, the the cost of capital needed to generate that income, and the economic profit, earned by the company the after-tax net the difference between this net operating income and the EVA, or true