Income from operations $990,000 $935,000 

Net Income $590,040 $557,700 

Interest Expense $6,600 $5,500 

Total Assets $4,400,000 $3,850,000 

Noninterest-bearing current liabilities $319,000 $308,000 

Tax rate 40% 40% Cost of Capital 12% 12% 

Capital Invested $4,081,000 $3,542,000 

Capital Interest $489,720 $425,040 

Income from Operations $990,000 $935,000 

Less Tax40% $396,000 $374,000 $594,000 $561,000 

Less Capital Interest $489,720 $425,040 EVA $104,280 $135,960 

Briefly explain why evaluation in terms of EVA will drive managers to focus on carefully evaluating the investment in assets while this will not be the case if managers are evaluated in terms of growth in profit?

Answer rating: 100% (QA)

The key difference between using EVA Economic Value Added and growth in profit as performance metrics is the focus on capital efficiency and value cre... View the full answer