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Preparation
Read “Economic
Value Added.”
Purpose of Lecture
Profit can be measured in two different ways: accounting profit
(the profit shown on the books), and economic profit (the
profit after compensating for the cost of equity capital
invested in the business). Economic value added (EVA) measures
the economic profit created in the business. This lecture
discusses what EVA is and shows how to calculate and use
it.
Structure of Presentation
The presentation first describes what EVA is and how it is calculated,
then does a calculation with the MBC Farms case study. Finally
it suggests ways to evaluate and improve EVA.
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