Your CEO has heard a lot about EVA as a management tool. This officer understands that the

Question:

Your CEO has heard a lot about EVA as a management tool. This officer understands that the basic concept is to calculate an estimate of true economic profit by subtracting an appropriate charge for the firm’s from its operating profit. However, the CEO wonders why focusing on EVA is any better than focusing on ROE. Can you help explain the concept?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...