How to understand ”EVA can be manipulated by choosing project with low initial cost’

This topic has 1 reply, 2 voices, and was last updated 13 years ago by ddnguyen.

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November 12, 2012 at 12:41 am #55203
sunnyfish2001
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“EVA can be manipulated by choosing project with low initial cost to boost short-term boost to value measure in the same way as profit measures.”
November 12, 2012 at 4:37 am #107057
ddnguyen
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Hi men
EVA = Nopa – CE x WacC in which Nopa we dont adjust for depreciation expense because it equal to economic depreciation. Therefore, low cost mean low economic dep and Nopa will increase meanwhile economic depreciation is very subjective and hard to define.
peace
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