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Economic Value Added (EVA)

Economic Value Added is an important measurement tool which used by organizations to determine whether existing or proposed investment contribute positively to the owner's wealth. Economic value added is calculated by by subtracting the cost of funds used to finance an investment from its after-tax operating profits. Positive EVA adds value to the owner's wealth whereas, Negative Value decrease owner's wealth. So, EVA having positive Value is considerable or acceptable .
For example, the EVA of an investment with after-tax operating profits of $410,000 and associated financing costs of $375,000 would be $35,000 (i.e., $410,000 $375,000). Because this EVA is positive, the investment is expected to increase owner wealth and is therefore acceptable

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