Isnt it the same thing? Thought EVA is another method of calculating RI? Im slightly confused because on a practice test, it revealed different results for the same problem
They’re similar but EVA is different in that it uses WACC. EVA = NOPAT - (WACC% x Total Cap) NOPAT = EBIT(1-T) RI = NI - (cost of equity x BV) EVA is economic value added to both shareholders and debt holders. RI is economic value of equity only.
thank you for ur explanation – i understand that but my point was it should still reveal the same result… no?
they would under the circumstances that: a. WACC was calculated with the Book Value of Debt and Book Value of Equity b. Interest rate on Debt used on the Income statement = rd used for WACC