Question 11.A.6: What can managers do in order to increase EVA®? (Hint: Use t...

The formula suggests that in order to increase EVA ^ {\circledR} , managers may try the following tactics:

\bullet Increase NOPAT. This may be done by either reducing expenses or increasing sales.
\bullet Use capital invested more efficiently. This means selling off assets that are not generating returns which exceed their cost and investing in assets that do.
\bullet Reduce the required rates of return for investors. This may be achieved by changing the capital structure in favour of loan capital (which is cheaper to service than share capital). This strategy, however, can create problems, as discussed in Chapter 8.