NPV: Cash flow
Revenue - Expenses
EVA = NOPAT – WACC * Capital Employ

（ii）Economic value added（EVA™）
Workings:

200*20% = 40
PBIT 1000 1000
Interest 200 0
Profit 800 1000
Tax 169 200
PAT

WACC =（55% x 12%）+（45% x 3·8% x（1 – 25%））= 7·88%
EVA™ = NOPAT –（WACC x capital employed）= 1,321

The business has created $1·32bn of value in the last year. The net operating profit after tax more than covers the cost of the capital used by the business.
The main benefit to EVA™ is its link to the overall corporate objective of maximising shareholder wealth. ROCE gives a much less direct link to shareholder wealth as it is less cash-like and more tied to the accounting assumptions around producing a profit figure.
The basic test of performance is simple since for EVA™ if it is positive, then the business is generating a return above that required by the providers of finance. ROCE requires a target level to be set usually based on benchmarking to the industry sector and the setting of this target return can be somewhat subjective.
EVA™ encourages investment for the future（for example, in advertising and development）by removing such costs from the performance period and treating them like capital expenditure. This will reduce the dysfunctional temptation for management to engage in some short-term decision-making, which can be a problem with the unadjusted capital employed figure from the financial statements which is used in ROCE. This is particularly relevant to Arkaig, where research and development is a significant activity.
EVA™ is consistent with net present value（NPV）as businesses with an increasing present value will increase EVA™. This will aid communication as NPV is a widely used appraisal measure for businesses.
Overall, however, the better link to shareholder wealth creation and the use of EVA™ in a value-based management framework may make this extra complexity worthwhile for a large entity such as Arkaig.

（iii）Performance hierarchy
According to Anthony, there are three tiers to decision-making in an organisation and each one has different needs which impact on the performance information which is required.
The strategic level is the one associated with the higher levels of management（such as the board）. Strategic performance is measured over longer periods（3–10 years）since this depends on the achievement of the strategies which will enable the achievement of the overall mission of the business. The information will be externally focused requiring information on competitors and markets against which the company’s performance can be benchmarked.
This information will be used mainly for planning rather than controlling. At this level of the hierarchy, forecasts will be prepared and broad targets will be set for the lower levels of management and their performance measured against these targets. Therefore, information will often be heavily aggregated and qualitative in nature（such as customer attitudes）. The board report evaluated above is an illustration of this type of information.
At the tactical level, the middle layer of management will be concerned with shorter term and more detailed objectives（possibly over a quarter or year）than the strategic level. The information will be collected on the deployment of the company’s resources and activities on a functional department or business unit level.

At the tactical level, the middle layer of management will be concerned with shorter term and more detailed objectives（possibly over a quarter or year）than the strategic level. The information will be collected on the deployment of the company’s resources and activities on a functional department or business unit level. This information will be used to see that the strategic objectives are being supported by the company’s activities. It will contain information to aid some short-term planning but will focus more on assisting this layer of management to control the operations of the business.
Much of the information at this level will be internally generated and will be combined with the targets supplied by the strategic level in order to make decisions. For example, generally, the achievement of budget targets or more specifically, the sales and marketing department might be required to report quarterly on changes in the order book in order that the strategic level can forecast future revenue levels.
The operational level focuses on the day-to-day activities of the business ensuring that specific tasks set by the tactical level are achieved. Therefore, information at this level is detailed and task-specific. It will be prepared on a regular basis（often daily or weekly）. It will be aimed to assist management at this level in controlling the business in order to achieve its short-term plans（weekly sales or monthly profit targets）. There will be little external information needed at this level as there is very little planning activity being carried out.