Video: Residual Income and Economic VAlue Added

In this lesson, Nick Palazzolo, CPA, demystifies the calculation of the economic value added for a corporation, using Chiefs, Inc. as a case study. He expertly clarifies the considerations of taxation within the computation, contrasting it with the approach for residual income where taxes are disregarded. Tackling the intricacies of the required return, Nick connects the dots between concepts like the company's break-even point and the weighted average cost of capital (WACC), explaining how this ties into the economic value added calculation. By breaking down each component—operating profit, taxes, and the required return—Nick ensures that you can confidently navigate through the process, culminating in calculating Chiefs, Inc.'s year-end economic value added in an engaging, accessible manner.