📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

  • google app store apple app store

    • Question

      A company has a Net Operating Profit After Tax (NOPAT)

      of ₹60 lakh. Its total capital employed is ₹400 lakh and Weighted Average Cost of Capital (WACC) is 12%. Compute the Economic Value Added (EVA) and interpret its significance.
      A EVA = ₹5 lakh (positive value creation) Correct Answer Incorrect Answer
      B EVA = ₹20 lakh (loss to shareholders) Correct Answer Incorrect Answer
      C EVA = ₹48 lakh (neutral) Correct Answer Incorrect Answer
      D EVA = ₹12 lakh (value creation) Correct Answer Incorrect Answer
      E EVA = ₹30 lakh (capital erosion) Correct Answer Incorrect Answer

      Solution

      EVA = NOPAT - (Capital Employed × WACC) = 60 - (400 × 12%) = 60 - 48 = ₹12 lakh. A positive EVA indicates value creation.

      Practice Next
      ask-question