This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Team Project #2 Coke versus Pepsi, 2001 Question 1 : What are the advantages and disadvantages of using EVA as a measure of company performance? Using EVA as a measure of company performance has many advantages. The first major advantage is that EVA directly takes into account the cost of capital. Other measures of company performance dont include the cost of capital (WACC), and as a result they lack the means to actually determine whether or not a company is creating value for its shareholders or not. By deducting the cost of capital from the net income, EVA ensures that the net income is not overstated and helps to give a more accurate evaluation of a firms operational and financial gain. In addition, EVA is a good measure of company performance because it allows firms to capitalize expenses that have multi-period gains. This is important because it allows a company to properly show what will generate future revenues and what will only generate revenues in the...
View Full Document
This note was uploaded on 11/03/2008 for the course FBE 421 taught by Professor Plotts during the Fall '07 term at USC.
- Fall '07