Business Unit Performance Measurement
3 important questions on Business Unit Performance Measurement
Cost of invested capital
Cost of capital * divisional assets (investering)
Fundamental problem EVA
Is that EVA is based on accouting income while the decision to invest is based on the present value of cash flows.
How should divisional assets be measured?
- Gross book value vs Net book value
- Historical cost vs current cost
- Beginning, ending of average balance
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