3.4 EVA and ROCE Flashcards by Kaushik Purahoo | Brainscape

Q

Formula for Return on Net Assets

A

Net Operating Profit After Tax / net assets

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Q

EVA = (RONA …..

A

WACC) * invested K
with net assets = invested K

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Q

RONA (% return) vs EVA (monetary return)

A

Managers may be motivated to do value-destroying projects to increase RONA if RONA < WACC
Management may be incentivized to forego profitable future projects because their RONA is less than the present RONA of the company

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