In calculating the firm’s Economic Value Added (EVA),Group of answer choicesthe net operating profit after tax is used to offset the capital employed.the capital employed refers to the total equity of the firm.the capital employed is the same as the total asset value of the firm.the weighted average cost of capital (WACC) is the dollar amount of financing cost incurred by the firm.

The Economic Value Added (EVA) of a firm is calculated using the following steps:

1. Calculate the Net Operating Profit After Tax (NOPAT): This is the profit a company would have earned if it had no debt and no financial leverage. It is calculated by subtracting the company's tax from its operating profit.

2. Determine the Capital Employed: This refers to the amount of money that a company has used to generate its profits. It is not the same as the total asset value of the firm, as it excludes short-term liabilities. It also does not refer to the total equity of the firm. Instead, it is typically calculated as the company's total assets minus its current liabilities.

3. Calculate the Weighted Average Cost of Capital (WACC): This is the average rate of return a company is expected to provide to all its security holders to justify their investment in the company. It is not the dollar amount of financing cost incurred by the firm, but a percentage that represents the cost of financing the company's capital.

4. Finally, calculate the EVA: Subtract the dollar amount of capital employed multiplied by the WACC from the NOPAT. This gives you the Economic Value Added, which is a measure of the true economic profit of the company.