If after-tax operating income is $185000, weighted average cost of capital is 11%, total assets are $485000 and total liabilities are $367000, then economic value added would be __________?
Correct answer: B. $172,020
- A. $142,020
- B. $172,020
- C. $162,020
- D. $152,020
Explanation
EVA equals after-tax operating income minus the capital charge: $185,000 − [11% × ($485,000 − $367,000)] = $172,020. The capital base here is assets less liabilities, or $118,000.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
Practise Cost Accounting
941 free Cost Accounting MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Cost Accounting questions
The measures that analyze the performance of a company, such as residual income, economic value added and customer satisfaction are collectively called ____________?
The return on sales is multiplied to investment turnover to calculate ___________?
The system in an organization, which defines behavior standards and code of conduct is known as ___________?
The costs that are not incorporated in accounting records, but are recognized in different situations are classified as ___________?
The formula to calculate return on investment, according to profitability analysis in DuPont method is ____________?
An investment is multiplied to required rate of return, to calculate: _____________?