Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 44

EVA ; Shareholder Value Analysis and Sustainability; Internet-Based Research Increasing shareholder value is a key objective for many profit-seeking organizations. As indicated in the chapter, EVA is meant to approximate "economic income" and in this sense can be viewed as a measure of shareholder value added by the firm during a period. Increasingly, managers are realizing that shareholder value is enhanced by creating value for employees, customers, suppliers, the community, and other stakeholders. This problem asks you to consider how EVA , as a measure of economic value created during a period, can be used to guide and justify sustainability-related investments.
Required
1. How is economic value added (EVA ) for any accounting period estimated How does this financial-performance metric differ from both conventional accounting income and from residual income (RI)
2. Given the definition of EVA you provided in requirement 1 earlier, provide some thoughts as to how EVA can be used as part of a comprehensive performance-management system to assess and justify corporate investments in sustainability-related projects.
3. Search the Internet to see whether you can identify an example of how an actual company used EVA to support a sustainability-related investment project or program (i.e., one that dealt with social or environmental performance).
4. Explain how EVA , as a financial-performance metric, can be used as part of a larger strategic management system.