UESTION 13

Which of the following statements is CORRECT?

a.

MVA gives us an idea about how much value a firms management has added during the last year.

b.

The primary difference between EVA and accounting net income is that when net income is calculated, a deduction is made to account for the cost of common equity, whereas EVA represents net income before deducting the cost of the equity capital the firm uses.

c.

EVA stands for economic value added, and it is defined as follows:

EVA = NOPAT (Total invested capital)(AT cost of capital %)

d.

EVA gives us an idea about how much value a firms management has added over the firms life.

e.

MVA stands for market value added, and it is defined as follows:

MVA = (Shares outstanding)(Stock price) + Book value of common equit