The correct answer is: C. direct relationship
Economic value added (EVA) is a measure of a company’s profitability. It is calculated by taking a company’s net operating profit after tax (NOPAT) and subtracting the cost of capital. The cost of capital is the rate of return that a company must earn on its investments in order to satisfy its investors.
Net present value (NPV) is a measure of the profitability of an investment. It is calculated by taking the present value of all future cash flows from an investment and subtracting the initial investment.
EVA and NPV are both measures of profitability, but they are calculated in different ways. EVA is a measure of a company’s profitability over time, while NPV is a measure of the profitability of an investment.
The relationship between EVA and NPV is direct. This means that a company with a high EVA is likely to have a high NPV, and vice versa. This is because a company with a high EVA is likely to be generating a lot of cash flow, which can be used to invest in new projects with high NPVs.
Here is a brief explanation of each option:
- A. valued relationship. This is not a correct option because EVA and NPV are not measures of value. EVA is a measure of profitability, while NPV is a measure of the profitability of an investment.
- B. economic relationship. This is not a correct option because EVA and NPV are not measures of economic value. EVA is a measure of profitability, while NPV is a measure of the profitability of an investment.
- D. inverse relationship. This is not a correct option because EVA and NPV are not inversely related. A company with a high EVA is likely to have a high NPV, and vice versa.